When No Drug Coverage Beats CVS Caremark Coverage

By Devin Stone

What do Senators, post office employees, and other government workers enrolled in the Federal Employee Health Benefits Program (FEHBP) have in common? They all apparently pay higher prices for generic drugs than uninsured patients when shopping at a CVS Caremark retail pharmacy location.

A startling new report by Change to Win analyzed prescription drug prices for enrollees in the FEHBP against the prices paid by uninsured patients that are enrolled in CVS Caremark’s Health Savings Pass (HSP) program. Change to Win found that FEHBP enrollees paid more on 85% of all drugs that are currently covered under CVS Caremark’s HSP.

It is important to note that the HSP cannot be used in conjunction with a patient’s current insurance. That means that FEHBP enrollees are not allowed to join the program. Therefore, FEHBP enrollees are forced to pay higher prices when using a CVS Caremark, which not only hurts the pocket books of patients, but costs the taxpayer more as well. According to Change to Win, for the drugs Levothyroxine, Lisinopril, and Metformin alone, the FEHBP overpaid annually by $32 million.

The games played by CVS Caremark don’t simply stop there. Located in the Change to Win report is a 16-page appendix of the prices paid by FEHBP enrollees. It’s important to remember that CVS Caremark is a pharmacy, as well as a pharmacy benefit manager (PBM). As a PBM, the company is responsible for negotiating with health plans to determine the cost of prescription drugs to the plan. It is also responsible for negotiating with other pharmacies, such as Walgreens and Wal-Mart, to determine how much these pharmacies will be reimbursed for services rendered. In the case of smaller, independent community pharmacies, it’s almost always much more of a take-it-or-leave-it contract offer than a negotiation.

Since PBMs act as both claims administrator, as well as a dispenser of medications through their mail order pharmacies (and retail pharmacies in the case of CVS Caremark), PBMs are the only companies in America that are able to effectively set prices for their rivals. As an example, take the drug Meftormin HCL, 1000mg.

Now, the cost to a pharmacy to acquire and dispense a medication is virtually the same regardless of the health plan that a patient is covered under, which means it’s legitimate to compare the price of a drug under the FEHBP against prices paid to independents under other health plans managed by CVS Caremark. Under the FEHB Standard Option Plan, it would cost the government $31.23 to purchase 180 tablets of Meftormin HCL, 1000mg from a CVS Caremark chain pharmacy. Based upon information made available to NCPA, under a typical independent community pharmacy contractual agreement with CVS Caremark, had that same prescription been purchased at an independent community pharmacy, the pharmacist would have been reimbursed $15.90. In other words, the independent community pharmacy is reimbursed less than the CVS Caremark chain pharmacy.

Here’s the catch, because CVS Caremark has to negotiate with the health plan to determine how much it will be billed for the prescription, CVS Caremark can negotiate contracts that penalize patients and health plans for not using a CVS Caremark pharmacy. For the independent community pharmacist that would have been reimbursed $15.90, the health plan would have been billed $69. Because CVS Caremark determines how much the health plan will be billed for using a rival pharmacy, CVS Caremark has the ability to prevent their own chain pharmacies from ever having to compete with less expensive independents. Although such a practice subverts the free market, leading to higher costs to patients, there are no laws making this practice illegal, either under private insurance plans or under the FEHBP.

So why hasn’t transparency been put in place to ensure that the federal government is getting the best plan for its money? It’s not for lack of trying. FEHBP is administered by the Office of Personnel Management. Its Inspector General expressed frustration to Congress about the agency’s being denied access to data by PBMs, saying: “There’s a good chance we’re not getting a good deal because of the lack of transparency.”

Representative Stephen Lynch (D-MA) has recently proposed a bill to address this and it has received strong support from NCPA, Change to Win and the National Treasury Employees Union.

So who objects to the bill? You guessed it, the PBMs. Their top lobby claims that transparency will increase costs because,

“The legislation would force mandated disclosure of sensitive pricing information, giving the upper-hand to drug makers and drug stores to charge higher prices at the expense of federal employees.”

However, the legislation specifically states that, “information disclosed by a health benefits plan or PBM” would be considered “confidential and shall not be disclosed by the Office or by a plan receiving the information.”

Simply put, nothing in the bill would allow drug makers or drug stores to access sensitive pricing information. Instead, requiring CVS Caremark and other PBMs to disclose to the federal government information regarding how much pharmacies are paid will allow the federal government to better negotiate contracts that are in the best interests of patients and taxpayers.

8 Responses to “When No Drug Coverage Beats CVS Caremark Coverage”

  1. 1 Jim Fields February 8, 2010 at 10:20 pm

    Cost plus pricing will be a boom for indpendent pharmacists.

  2. 2 Jim Parker February 10, 2010 at 7:08 pm

    This article is intent on scandalizing CVS. How is this any different than the government paying a local community hospital less for an otherwise uninsured Medicaid patient than the hospital would receive if the patient had BLue Cross BLue Shield coverage? For years, the answer was, “some payment through Medicaid is better than none.” Could we also consider that CVBS is doing a public service to the uininsured by extending prescription drugs to the uninsured at a price that’s more in line with what they can afford? When it comes to health care, we have a system that often seems to have been designed to be confusing and counterproductive. We shouldn’t be so quick to make judgments when we don’t get the answer we’d like.

  3. 3 John Goodman February 20, 2010 at 8:21 pm

    In spite of what you see in the news, on TV, or the internet, the bottom line is – “People without prescription coverage are the victims of high medication costs.”

    Relief must be a priority for the suffering Americans making decisions about food on the table or prescription medication.

    There are several humanitarian efforts afoot to aid those in need – One being . . . a discount prescription card good for ALL drugs without limitations, age discrimination, or activation of program with personal information.

    A Discount Prescription Card could be used by most pharmacies offering the client a reduced cost on ALL prescriptions.

    This is a free resource for Everyone – No cost to the Pharmacy (as they usually offer wholesale cost for drugs to insured Americans). No cost to the end user, as they do not charge for the use of thier card. Coupon can be printed off their website and used immediately at most any pharmacy. The card never expires, and they ask for NO personal information.

    Here is a simplified solution to anyone that dispenses medications can use, at their own discretion. Offer a discount to any uninsured American by going to http://www.FreeRxCardforall.com and utilize this feature.

    Pass this information forward to anyone that you think would be of benefit. Anyone in need can use this program. This would include any senior citizen caught in the Medicare Donut Hole!

    Thanks for reading.

    • 4 Norman W. Davis October 12, 2010 at 11:38 am

      While on the surface a “discount” card for all might sound like a great idea, the statement that no personal information is required is baffling, to say the least. In order to get the “discount”, I’m sure that the claim has to be transmitted which would be through a switch. The name and address of the patient, the physician, and store info would be transmitted as well as all the pertinent info from the Rx which is mined and sold for a #@$& of a lot more than we receive for filling the Rx and a rebate (kickback) to whoever “provided” this “discount” card whether online, on the counter at a convenience store, thru a bank or insurance company, a governmental authority such as a county commission,etc. In addition to the “discount” all kinds of HIPPA information is being “given” away and provided as a revenue stream to anyone but the one who has capitalized the process, assumed the risk and corresponding liability, provided the labor, containers, information, including counseling. This activity while seemingly well-intended is spurious, at least and should be stopped immediately! There is something inherently wrong with a system which allows someone other than the provider of the sales and service to “discount” those sales and service. If a discount is given, it should be by those who provide the sales and service, not some biased, or possibly naive, 3rd party. Let them discount their own sales and service and leave us the @#$! alone!

  4. 5 top poker software April 18, 2010 at 3:14 pm

    This is really more effective may take on the concept. I never thought of it that way. I came across this site recently which I think will be of great use http://toppokersoftware.com/ Have a look!

  5. 6 Ray October 5, 2010 at 7:31 pm

    This article is more about the intelligence of government employees than drug prices.

  1. 1 PBM Transparency: Coming to a Federal Employee Health Plan near You « Trackback on February 24, 2010 at 7:29 pm
  2. 2 Another CVS Caremark Bait and Switch? « NCPA's The Dose – The Voice of the Community Pharmacist Trackback on June 3, 2010 at 1:30 pm

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