Stark pharmacies struggle amid PBM issues; CVS offered to buy stores

CANTON  Ohio Auditor Dave Yost is expected to release a report this morning that should shed light on whether pharmacy benefit managers or PBMs have been overcharging the state's Medicaid program at taxpayer expense. 

The report, requested by state legislators, may also provide more information on whether PBMs are inadequately reimbursing pharmacists across the state, including in Stark County, for dispensing drugs to Medicaid patients. And it could reveal the spread — the difference between what it charges Medicaid and what it pays the pharmacists for the drugs — PBMs are pocketing.

A local pharmacist and the Ohio Pharmacists Association weren't waiting for the release of the report. They said at least one major PBM, known as CVS Caremark, without notice last October, slashed reimbursement rates for medications for Medicaid patients to below what it cost the pharmacists for the medications.

CVS Caremark is the PBM for four of the five managed care organizations that manage Medicaid benefits under a contract with Ohio. PBMs negotiate drug prices with drug makers on behalf of health insurance plans and employers, process drug claims by pharmacists and reimburse the pharmacists.

Antonio Ciaccia, director of government affairs for the Ohio Pharmacists Association, said member pharmacists reported with Caremark's reimbursement cuts, they weren't being reimbursed the full cost they paid for the drugs for most of their prescriptions. That means they were often losing money to fill them.

Local pharmacists said CVS Pharmacy a short time after the reimbursement cuts sent them letters offering to buy their pharmacies. CVS Health owns CVS Caremark and the CVS drugstore chain.

An audit released in June commissioned by Ohio Medicaid found CVS Caremark and Optum RX, the other Medicaid PBM in Ohio, billed Ohio Medicaid 8.8 percent more than they paid for the drugs from pharmacies, the Columbus Dispatch reported. The total amount during the 12-month period ending in March: $223.7 million.

In advance of the release of Yost's report, the Ohio Department of Medicaid Tuesday announced PBMs for its Medicaid program would have to eliminate spread pricing and be paid a flat administrative fee and only bill the state at the same rate it reimbursed pharmacists.

Canton makes change

The city of Canton is dropping CVS Caremark as its longtime prescription benefits manager for its self-insured health plan for about 1,600 employees and family members, said Amy Cole, the city's director of personnel.

She cited Caremark's pricing practices with local pharmacists. She also said CVS Caremark last year increased by 10 times a generic medication crucial to keeping a city employee and an employee's family member alive, required the city's plan to get the drug at the higher price from a CVS specialty pharmacy and prohibited the city's plan from getting the drug at a cheaper price from a competing pharmacy.

"The pricing structure isn't fair," said Cole, adding Caremark's rebates for certain drugs also were not timely. "It's not fair to local pharmacies."

Cole said she will present a plan on the transition to a new PBM to City Council on Aug. 28.

Complicating the legal stakes for local pharmacists, the contracts they have with CVS Caremark prohibit them from criticizing the company, said Ciaccia.

Local pharmacists react

Steve Fettman, owner of Davies Pharmacy in Canton, released a written statement that did not mention CVS Caremark by name.

"Ohio Medicaid is heavily dominated by a single PBM, who controls 35 percent of our overall business," Fettman's statement said.

"After cutting our reimbursements in October 2017, we received letters shortly thereafter from that same PBM asking to purchase our pharmacy. While I have no way of knowing whether this was part of a larger plan, I felt the purpose was to limit competition. This is extremely concerning, because I have never seen the marketplace this bad. More than 160 pharmacies have closed in the last couple years. Why is it that the pharmacy that controls the reimbursements to its competitors is the one most aggressively looking to grow in a declining market?"

Ciaccia said member pharmacists have told him if they refuse to accept Caremark's Medicaid drug reimbursement rates, they also risk losing the business for patients covered by a private insurance plan using CVS Caremark.

Stark County government's self-insured plan, which covers about 1,500 county employees and more than 2,000 family members, uses CVS Caremark as its PBM. So does the health plan for about 900 Canton employees represented by two American Federation of State, County and Municipal Employees locals, said Cole. And so do the health plans for TimkenSteel, Diebold and teachers insured through the Stark County Educational Service Center.

Fettman's statement said, "At my pharmacy, more than 80 percent of my patients are represented by the three large PBMs. ... So, it's sign the contract, or you'll have no patients. It's all take-it-or-leave it."

Not selling

Paul White, owner of Medicine Center Pharmacy in Canton, said without naming any PBMs that "the reimbursements have just continued to decline and decline and decline."

He confirmed CVS last year offered to buy his pharmacy as Rite-Aid and Walgreens had in the past.

"I have no interest in selling," White said. "I have a lot of fabulous people working for me. If I retire or sell my business, where are they going to go? ... I want to remain a pharmacist until I die."

CVS Health spokesman Michael DeAngelis emailed a statement.

It said CVS Caremark negotiates prices with drug makers and plays an important role in helping employers, unions, health plans and government agencies control rising drug prices.

It called local, independent pharmacists "important partners" that make up 40 percent of its network, whom they reimburse "at competitive rates" higher than rates paid to CVS pharmacies. The statement said independent pharmacies also negotiate their own "substantial" discounts with drug manufacturers and wholesalers. And CVS Caremark's PBM business is strictly prohibited from coordinating with CVS Pharmacy's acquisitions of drugstores.

Ciaccia said CVS Caremark may be reimbursing independent pharmacies at rates about 3.5 percent higher than CVS pharmacies, but the spread between the reimbursements and what it charges Medicaid is so high, according to the state assessment, CVS Caremark is still making a tremendous amount of money.

State Rep. Thomas West, D-Canton, said PBMs such as CVS Caremark, threaten the viability of local independent pharmacies like Davies and Medicine Center.

"When you have your competitor being able to regulate the industry, and then they contact you, 'you're struggling, would you like to (be bought out)'?" he said. "It's a big threat to our local pharmacy, to our community."

West is a joint sponsor of House Bill 479, which would require pharmacists to tell patients if the out-of-pocket cost of a drug is less than the drug co-pay and charge them the lesser price.

CVS Caremark said it does not prohibit pharmacies from telling a patient if the out-of-pocket cost is lower than the co-pay for a Caremark prescription.