Despite state warning, CVS Caremark has not reversed cuts to pharmacists

Nov. 14, 2018

Two weeks after CVS Caremark promised to reverse cuts in payments to Ohio pharmacists, many pharmacies report they are still losing money on Medicaid prescriptions.

That means that CVS Caremark, a pharmacy benefit manager and middleman in the pharmacy supply chain, continues to charge taxpayers who fund Medicaid more than it pays pharmacists to fill prescriptions for the poor and disabled.

“Nothing has changed. It’s gotten worse,” said Wilmington pharmacist Mark Kratzer, of Kratzer’s Hometown Pharmacy.

Kratzer said his reimbursements went from a loss of 66 cents per prescription in October to a loss of $2.37 so far in November. In September, he was reimbursed about $2.10 for each Medicaid prescription. He says his cost to fill a prescription is about $10.

The Ohio Department of Medicaid launched an investigation two weeks ago after the Dispatch presented state officials with evidence that CVS Caremark had cut its payments to pharmacists.

When told the practice was continuing, Medicaid spokesman Tom Betti said, “This is why we are moving to a transparent pass through model effective Jan. 1, so the state has full knowledge of prescription drug pricing. Any attempt by CVS to take advantage of the spread model contract over these last few months is completely unacceptable.”

Betti declined to comment about what, if anything, Medicaid's investigation has turned up.

Reportedly angered by the news of again-slashed reimbursements, legislative leaders on Wednesday scheduled another hearing before the House Health Committee on House Bill 465, which would cut CVS Caremark and other pharmacy benefit managers out of Ohio Medicaid.

The bill didn't come to a vote after Medicaid officials projected that such a "fee-for-service" arrangement would cost more than the present one. Assistant Director Jim Tassie also said his department is working to implement a more-transparent system Jan. 1 and take further steps from there.

Even though the committee didn't vote, Thursday's hearing is a sign of growing impatience with CVS's Medicaid practices. "You have a very broken system," Antonio Ciaccia of the Ohio Pharmacists Association told the committee. "It's been outsourced to for-profit entities."

Michael DeAngelis, CVS Caremark's spokesman, said reimbursements were adjusted on Nov. 8 after complaints were raised and pharmacists should see the change by now.

Data from Kratzer and other pharmacists raise questions about that claim. In the last week, one pharmacist reported his reimbursements went from 51 cents a prescription during the period of Oct. 15 to Oct. 31 to minus 69 cents in the last week.

That same pharmacist was reimbursed about $2.40 per prescription in September.

Another pharmacist in the Dayton area reported a reimbursement of minus $1.85 the first week of November.

And a Cleveland-area pharmacist said he was making about 35 cents on average for Medicaid prescriptions in October, far less than the $9.43 he was paid for other prescriptions, and not nearly enough to cover the $10 it costs him to fill each prescription.

"Nothing changed at all. Everyone says they are going to do something, but they don’t do anything," he said. "I sold one for $100 under cost, but the woman needed it."

Why this matters to the public is that the state is paying a flat rate for medications, meaning that CVS Caremark is pocketing more taxpayer money when the pharmacy benefit manager slashes reimbursements to Ohio pharmacists.

There is growing concern within Medicaid and at the Statehouse that CVS Caremark is reaping as much as possible from Ohio before the new contracts are in place by Jan. 1.

Last week, DeAngelis said in an e-mail, “we plan to continue providing PBM services to our Ohio MCO clients in 2019 under the new pass-through model requirement.” He also said last week that CVS Caremark would correct some of the drastic cuts in reimbursments.

Earlier, DeAngelis said the company uses several lists, which it doesn’t make public, to set drug prices and reimbursements to pharmacists.

"Medicaid and Auditor Yost’s reports caught CVS/Caremark with their hand in the cookie jar. Now everyone is watching the jar, and CVS is still grabbing cookies," Ciaccia said.

"I continue to be amazed at the obscene level of control CVS appears to have over the economic fates of their competitor pharmacies and our state budget. We had this same conversation one year ago, and we are right back where we started. When will regulators actually end Medicaid’s all-you-can-eat buffet for the PBM industry?"

For three weeks, pharmacists have been providing The Dispatch with data that shows CVS Caremark cut what it paid pharmacists for drugs they provided to Medicaid patients.

The drop in reimbursements mirror what CVS Caremark did last year in the fourth quarter of 2017. Pharmacists across Ohio launched several complaints with the state’s Department of Insurance and with lawmakers asking for an explanation.

CVS Caremark raised the rates in 2017 after The Dispatch and lawmakers made public what was happening.

State Rep. Scott Lipps, R-Franklin, is the sponsor of the bill that would cut out pharmacy benefit managers if the five companies that oversee care for Medicaid patients don’t take action.

“We are no longer going to accept the tail wagging the dog,” he said.

Lipps said he is holding the five managed-care companies responsible for reeling in CVS Caremark. The five companies manage the care for the more than 3 million poor Ohioans on Medicaid. CVS Caremark is the pharmacy benefit manager hired by four of the five managed care plans to keep drug costs in check.

Dispatch reporter Marty Schladen contributed to this story.