Posted
Mar 12, 2018 at 8:15 PMUpdated
Mar 13, 2018 at 10:07 AM
Pharmacy
giant CVS stands accused of overcharging Ohio taxpayers millions in an attempt
to drive out retail competition — a charge that CVS flatly denies.
Bottom
line: The company allegedly boosts its profits by overcharging insurers for
medications while often reimbursing pharmacists less than the cost of the drug,
critics say.
As a
result, retail pharmacies in the Buckeye State have been dropping like flies,
and state regulators are looking at ways to bring more transparency to a
Medicaid benefits-management system that CVS dominates.
“Where
I’m losing pharmacies right now is in high-Medicaid areas,” said Antonio
Ciaccia of the Ohio Pharmacists Association. He noted that 165 Ohio pharmacies
have shuttered in the past two years.
Medicaid,
the federal-state health program for the poor and disabled, will spend about
$3.2 billion on prescription drugs in Ohio this year. CVS Caremark, an arm of
the company that manages pharmacy benefits, handles most of that money by
billing insurers that contract with the state and then reimbursing pharmacies
that fill patients’ prescriptions.
Ohio
Medicaid Director Barbara Sears stressed, “This is not an Ohio Medicaid
problem. This is impacting all 50 states. It’s a CVS Caremark issue, and it’s
not just impacting independent pharmacies.” Sears said “larger chains” also
have complained about reimbursement rates.
Ohio
contracts with five managed-care companies to coordinate health-care services
for 89 percent of Medicaid patients, paying them a set per-member, per-month fee.
The managed-care companies hire pharmacy-benefit managers, dubbed PBMs, which
decide which drugs are covered, negotiate rebates with drug companies, and set
how much pharmacies get paid to dispense them to patients.
Not
only does CVS operate Ohio’s second-largest retail pharmacy chain, but CVS
Caremark is the pharmacy-benefit manager for four of Ohio Medicaid’s five
managed-care companies.
Like
Medicaid managed-care companies, PBMs are supposed to save taxpayers money.
Patrick
Stephan, director of managed care for the state Medicaid program, said “managed
care and pharmacy-benefit managers are saving Medicaid dollars.”
But the
public doesn’t know exactly how much of the more than $3 billion spent on
pharmaceuticals goes to pharmacies and how much simply fattens PBMs’ bottom
lines.
Ciaccia
said he suspects that CVS Caremark is engaged in “spread pricing” — using one
list with a low price to reimburse the pharmacist, and another list with a high
price to bill the managed-care program, and pocketing the difference. It’s
impossible to know exactly what’s happening because the creation and use of
such “maximum allowable cost” lists happens behind a veil of secrecy, he said.
“The
(maximum allowable) price is not an objectively defined and publicly available,
transparent pricing list,” Ciaccia said. “It is PBM-defined, and it is
proprietary.”
Ohio
House Finance Committee Chairman Ryan Smith, R-Bidwell, said that “independent
pharmacists are getting killed. Their rates are going down, but prescription
costs are going up. It seems like the middleman is making out.”
CVS
spokeswoman Christine Cramer didn’t answer questions about whether the company
engages in spread pricing. She did say that the company has measures in place
to ensure that its pharmacy-benefit arm does nothing to advantage its retail
arm.
“There
are strict firewalls between our retail business, CVS Pharmacy, and our PBM
business, CVS Caremark,” she said in an email. “CVS Pharmacy has no insight
into CVS Caremark’s reimbursement of independents.”
However,
Ciaccia said the company’s pharmacy operation wouldn’t have to know what its
PBM was doing to get an advantage out of the arrangement.
“Officially,
they have maintained that firewall,” he said. “But it doesn’t take a rocket
scientist to figure out that, ‘Hey, over here on the PBM side, if we lower
reimbursements to the pharmacy marketplace, then our pharmacy is probably going
to benefit from that.’ They’re going to be able to put people out of business.”
State
regulators say they know how much they pay the managed-care companies, and how
much they are paying their pharmacy-benefit managers, but they have no idea how
much the PBMs are paying pharmacies.
Starting
in July, Ohio is requiring Medicaid managed-care companies to report how much
PBMs are paying pharmacies to allow “more transparency” on prescription costs.
CVS’
Cramer said her company is working to get the best deal for taxpayers and
pharmacies.
“We
reimburse our participating network pharmacies, including the many independent
pharmacies that are valued participants in our network, at competitive rates
that balance the need to fairly compensate pharmacies while providing a
cost-effective benefit for our clients,” she said. “In fact, reports from the
independent pharmacies themselves show that their average profits and prescription
volumes have remained largely unchanged over the last decade.”
But
pharmacists say it’s clear to them that PBMs are profiting while they are
losing money.
“What
are PBMs pocketing? That’s the million-dollar question. I guarantee it would
make you fall off your chair,” said one Columbus pharmacist who asked to remain
anonymous because of confidentiality clauses in his PBM contract.
Low
Medicaid reimbursements threaten to prompt the closing of independent
pharmacies such as his and others that can’t absorb the losses.
“The
PBM industry has run amok,” said Max Peoples, who owns Uptown Pharmacy in
Westerville and another drugstore in Marengo. “Reimbursement rates for Medicaid
are more volatile and much lower. If the PBM is paying us less than what we can
buy it for, it’s a problem.”
Peoples’
Marengo pharmacy serves a large number of Medicaid patients, and it breaks even
or loses money on 35 to 40 percent of the prescriptions it fills, he said. In
Westerville, the rate is 25 percent.
The
PBMs also routinely ban pharmacists from advising patients about pricing.
Peoples
said he had a patient whose prescription co-payment was significantly higher
than the amount the pharmacy was being reimbursed, and the patient could have
saved money by paying out of pocket rather than using insurance coverage. “But
in our contract, the PBM does not allow us to discuss pricing, so we advise
patients to ask for the cash price,” he said.
“They
take every opportunity to disguise the facts. That’s how they make their
money,” Peoples said. “Transparency. That’s the only way we know we’re not
getting ripped off. Everything has to be out in the open.”
The
Columbus pharmacist hopes that state officials act soon.
“I’m
staying in business because I’m praying and hoping it changes, but if it
doesn’t, I won’t survive,” he said.
Peoples
provided several examples to illustrate the problem. In one, the pharmacy paid
$44.61 for a one-month supply of muscle relaxant tizanidine. The PBM reimbursed
the pharmacy $11.25, for a loss of $33.36.
“If
I’ve got the drug, I am obligated to dispense it,” the pharmacist said. “We
don’t have to stock the drug, but I can’t not stock every drug. My patients
need them.”
http://www.dispatch.com/news/20180312/cvs-accused-of-using-medicaid-rolls-in-ohio-to-push-out-competition
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