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Pa. pharmacies clash with CVS Caremark

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Early in 2017, independent pharmacists in Pennsylvania started getting notices from CVS Caremark that their reimbursement for some prescription drugs would be reduced.

They kept getting more notices throughout the year until it got to the point in October that the small-business owners were losing money on some drugs, said Pat Epple, CEO of the Harrisburg-based Pennsylvania Pharmacists Association.

Adding to the frustrations of the pharmacists — who were concerned about staying afloat — some of them received letters from CVS Pharmacy asking if they wanted to sell their businesses. That prompted a move to investigate CVS Caremark’s actions.

“We used to try to be the nice guy,” said Epple. “But I don’t mind calling them out any more.”

Last month, after calls from pharmacists and their supporters, Pennsylvania’s auditor general, Eugene DePasquale, said he would be looking into the reimbursements. The state attorney general, Josh Shapiro, also has been asked to take action, similar to an investigation underway by the attorney general in Arkansas. And a Pennsylvania lawmaker plans to file legislation that would ensure fair reimbursements to independent pharmacists.

Mike DeAngelis, senior director of corporate communications for Rhode-Island based CVS Health, which is the parent of CVS Caremark, said CVS was aware of the concerns and addressed them in October. As one of the three largest pharmacy benefits managers, or PBMs, CVS Caremark reimburses pharmacies for the prescriptions they fill for the members of a PBM’s clients, such as employers, health plans and unions. CVS Health also is the parent of CVS Pharmacy, which operates about 9,800 retail locations nationwide.

DeAngelis said independent pharmacists account for 40 percent of the CVS Caremark network and remain an important partner for the PBM.

“Like any business, independent pharmacies want to be paid as much as they can,” he said in a written response to questions. “CVS Caremark’s responsibility as a PBM is to balance the need to fairly compensate all of the pharmacies in our network, while providing a cost-effective benefit for our clients.”

After reimbursement rates were lowered, and pharmacies complained, the rates were re-adjusted last fall, he said.

Nonetheless, Epple said, some prescription reimbursements had fallen so low that some drugs were being sold with “one penny on profit.” Some businesses were losing up to $20,000 per month, which was unsustainable, she added.

Then, the businesses started receiving solicitations from CVS Pharmacy asking if the owners wanted to sell.

“I know what independents are experiencing right now: declining reimbursements, increasing costs, a more complex regulatory environment,” said one letter from CVS Pharmacy obtained by the Business Journal. “Mounting challenges like these make selling your store to CVS Pharmacy an attractive and practical option.”

DeAngelis said CVS Pharmacy has been buying pharmacies since before CVS and Caremark merged in 2006.  

“Pharmacy acquisitions are the industry-standard practice under which a closing pharmacy transfers its prescription files to another licensed pharmacy, which they are required to do by law,” he said in an email.

He added that the PBM and retail acquisition office are completely separate and do not coordinate activities. Nevertheless, the retail-business side stopped sending out the solicitation letters late last year, he said.

Doyle Heffley, a Republican who represents the Carbon County area in the Pennsylvania House, said his office was notified about the issues and has been working to develop legislation that would address reimbursement rates for independent pharmacies.

“Over the last few months, I continue to hear from my local pharmacies about severe cuts to pharmacy reimbursement rates by specific PBMs, especially Medicaid,” Heffley said in a letter to his House colleagues. “For many medications, payments are well below cost, forcing pharmacies to operate in the red. These pharmacy reimbursement cuts make it extremely difficult for the 900 independent pharmacies in our Commonwealth to maintain inventory and serve our most vulnerable citizens.”

Heffley said in an interview that he hopes to finish his research and file a bill later in the month or in June. The issues are not unique to Pennsylvania pharmacists, he said.

Earlier this year, the attorney general in Arkansas started looking into similar issues over reimbursements. Other states also have been grappling with what to do, Heffley said.

“The pharmacists are not asking to make a lot of money,” he said. “But they at least need to cover their costs.”

DeAngelis acknowledged that the reimbursement issues raised in Arkansas are similar to the concerns voiced in Pennsylvania. However, he said some independent pharmacies and their lobbying groups have been unfairly portraying the PBMs and ignoring that independent pharmacies have been seeing increasing revenues and profit margins over the past 10 years.

Epple maintains that the issues need to be addressed as soon as possible because independents have been fighting adverse trends for years with all the PBMs, which include OptumRx and Express Scripts.

“It’s been getting worse and worse,” she said.

Pennsylvania Auditor General Eugene DePasquale could not be reached for comment. His spokesman, Susan Woods, said auditors have only just started their work and she couldn’t comment on how long their research would take.

A spokesperson for Attorney General Josh Shapiro declined to confirm or deny if his office is investigating.

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