While the company prepares to dispense “happy talk” at its “Analyst Day” October 8th, the numerous government inquiries into CVS Caremark’s business practices seem to offer a less-than-rosy glimpse of the company’s outlook:
- The Federal Trade Commission is actively investigating CVS’ merger with pharmacy benefit manager (PBM) Caremark. The FTC has not yet reached a resolution, but has testified about the investigation and cited that it involves both competition and consumer protection issues. (You can read NCPA’s case for the investigation here.)
- The Senate Aging Committee recently began asking CVS Caremark questions regarding possible patient steering and cost concerns for Medicare Part D beneficiaries. This could be followed by other investigations, perhaps by Medicare or the U.S. Department of Health and Human Services’ Office of Inspector General.
- The Senate Judiciary Committee’s Antitrust, Competition Policy, and Consumer Rights Subcommittee recently requested a briefing from CVS Caremark and has asked for a similar briefing from the FTC.
- A national and state class action suit was launched in October against CVS Caremark, charging among other things that CVS Caremark was committing RICO violations as a result of the improper exchange and misuse of personal information and widespread violations of the Health Insurance Portability and Accountability Act (HIPAA). This suit poses significant potential liability for CVS Caremark and could compel the restructuring of their use of information.
- Private patient information entrusted to CVS Caremark was found blowing in the streets of Manhattan this summer, The New York Daily News reported. The incident comes barely one year the company agreed to settle Federal Trade Commission charges that it failed to take “reasonable and appropriate security measures” to protect the sensitive financial and medical information of customers and employees, a violation of federal law. In a companion agreement with the U.S. Department of Health and Human Services, CVS Caremark paid $2.25 million to settle alleged HIPAA violations.
- Meanwhile, 24 state attorneys general are conducting ongoing investigations of allegations of deceptive and anticompetitive conduct by CVS Caremark.
CVS Caremark is facing potential enforcement action from the FTC and state regulators, enormous pressure from Congress, and huge litigation costs. The federal antitrust agencies have trained their enforcement guns at major corporations that engage in exclusionary tactics and handcuff their rivals. In the last three months, the FTC settled the Intel case and earlier this week the Department of Justice brought a major enforcement action against American Express and settled cases with VISA and MasterCard, changing how consumers will be able to shop in the future.
Perhaps CVS Caremark is the next shoe to drop?