May 6, 2019

Insurance giant Aetna has been fighting in court to suppress records that a top company insider says show that pharmacy middleman CVS Caremark overbilled Medicare more than a billion dollars for prescription drugs.

Critics say the case illustrates the conflicts of interest inherent in the proposed merger between Aetna and CVS, the national pharmacy chain, which is now being reviewed by a federal judge in Washington, D.C.

Another federal judge, in Philadelphia, on April 23 denied Aetna's demand that Sarah Behnke, the company's chief Medicare actuary, return "all of Aetna's records that are attorney-client privileged, attorney work product, or confidential and proprietary business information, and destroy copies of all such records."

The ruling was made in a 2014 case filed under the federal False Claims Act arguing that CVS Caremark, a pharmacy benefit manager owned by CVS, was billing Aetna and other Medicare Part D plans much more for drugs than it was paying pharmacists without reporting it as required by the U.S. Centers for Medicare and Medicaid Services, also known as CMS.

"We believe CMS was very clear in 2010 when it eliminated spread pricing in Medicare," Susan Thomas, the lawyer handling the case, said last week.

Spread pricing is the difference between what a pharmacy benefit manager charges insurers for drugs and what it pays pharmacies to dispense them.

Such pricing practices have been a big issue for Ohio Medicaid, where an analysis last year showed that pharmacy benefit managers, including CVS, in 2017 had billed taxpayers $224 million more than they paid pharmacists for drugs. That was three to six times the going rate, the analyst said, and Ohio lawmakers, the attorney general and the governor have been taking multiple steps to reform the practice.

Aetna, which last year administered Medicare Part D plans for 750,000 beneficiaries nationwide, contracted with CVS Caremark to be its pharmacy middleman, meaning it negotiates rebates from manufacturers, pays pharmacies and bills the government.

In 2013, Behnke determined that the prices Aetna was paying for drugs “were as much as 25 percent to 40 percent higher than its competitors’ prices, or far less competitive than Aetna’s size would seem to dictate,” the lawsuit says.

In late 2017, Aetna and CVS announced plans for a $70 billion merger. The companies have combined in some respects, but completion of the deal is on hold while U.S. District Judge Richard Leon hears concerns that the combined company would exacerbate what some say are anti-competitive practices by CVS.

For example, independent pharmacists in Ohio say that CVS reduced their reimbursements and then sent them letters offering to buy their pharmacies, and they also accuse CVS Caremark of several practices that serve to steer patients into CVS retail pharmacies.

At the time Behnke's whistleblower suit was filed in 2014, Aetna's goal was to ensure that its policyholders and taxpayers were getting the best possible deal for drugs.

But on May 8, 2018, about six months after its merger with CVS was announced, Aetna went to court and demanded that Behnke return documents she might use in support of the False Claims suit she'd filed against CVS.

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A spokesman for merging companies was asked whether Aetna now has a conflict between the interests of CVS and Aetna's policyholders.

"While we don’t comment on legal proceedings, CVS Health complies with all applicable laws and CMS regulations related to the Medicare Part D program," CVS/Aetna spokesman Micheal DeAngelis said in an email. "Also, contrary to these false allegations and to the Dispatch’s continued one-sided coverage, CVS Health is committed to helping both patients and payors with solutions to lower their prescription drug costs."

Diana Moss, president of the American Antitrust Institute, said she couldn't comment on the specifics of Behnke's whistleblower case, but she said in general that the interests of CVS and Aetna can be discerned.

"I think it is safe to say that the companies at this juncture have incentives to downplay any legal issues that arise between them, given the pendancy of their vertical merger," Moss said in an email.

Antonio Ciaccia of the Ohio Pharmacists Association said the merger effort has led Aetna to adopt the wrong priorities.

"It looks like the expert Aetna hired to analyze data and ensure fiscal integrity did her job, and did it very well," he said. "It’s a shame that Aetna’s proposed marriage to CVS Health seems to have come at the expense of transparency and accountability to taxpayers. Aetna should be supporting and elevating the brave work of Sarah Behnke rather than trying to sweep it under the rug."

The False Claims Act encourages whistleblowers to come forward when they have evidence that the federal government is being defrauded by giving them a share of funds and damages awarded if the claim is successful. The judge in Behnke's case, Mitchell S. Goldberg, has scheduled a hearing for Thursday May 9 to consider several motions, including one by CVS to dismiss it.

The judge in the merger case, Richard Leon, is expected to schedule a hearing soon to hear from opponents of the merger, such as the American Medical Association.