CVS Caremark Abuses Warrant Thorough FTC Investigation And Remedies

May 25, 2010

As appeared in The Hill
By Joseph H. Harmison, PD
President
National Community Pharmacists Association 

Economist Milton Friedman once said, "The most important single central fact about a free market is that no exchange takes place unless both parties benefit." The business relationship between independent community pharmacies, their patients and CVS Caremark falls short of that standard. 

The root of the problem is the company's dual role as both prescription drug plan administrator for approximately 82 million Americans and as the owner of 7,000 drug stores. That inherent conflict apparently allows it to leverage independent community pharmacies into unfavorable reimbursement contracts for "in-network" access to many patients. Then, CVS Caremark steers patients to fill prescriptions at its own mail order or retail pharmacies ¯ effectively becoming both payors of and competitors with community pharmacies. 

When the Federal Trade Commission (FTC) approved the merger between retail chain pharmacy CVS and pharmacy benefit manager (PBM) Caremark in March 2007, the company pledged to be "agnostic as to where the consumers fill their prescription." Community pharmacists strongly opposed the merger and doubted CVS Caremark's commitment to agnosticism. Those misgivings appear to have proved prophetic. 

Since the merger, the National Community Pharmacists Association (NCPA), which represents independent community pharmacies, has been inundated with complaints about the company's conduct. Patients, who are the direct targets of these tactics, resent now being steered against their will to CVS Caremark's mail order and retail pharmacies. Savings promised by CVS Caremark have seemingly vanished into thin air. Sensitive patient information is apparently being accessed by the company not for valid health reasons of payment, treatment and operations, but simply to pursue an even greater market share. Community pharmacies have seen any semblance of a level playing field wiped away by this $99 billion predatory corporate behemoth. 

After raising these concerns, NCPA officials and over 80 community pharmacy owners were granted an opportunity to present evidence of CVS Caremark's anti-competitive and anti-privacy practices at the FTC headquarters on May 13, 2009. Additional, bipartisan support was provided, after hearing about the complaints from their constituents (whether they were patients or pharmacists) by U.S. Senators Sherrod Brown (D-OH), Byron Dorgan (D-ND), Russ Feingold (D-WI), Amy Klobuchar (D-MN), Frank Lautenberg (D-NJ), Mark Pryor (D-AR) and Roger Wicker (R-MS), and U.S. Representatives Michael Acuri (D-NY), Robert Aderholt (R-AL), Marion Berry (D-AR), Jo Bonner (R-AL), John Boozman (R-AR), Judy Chu (D-CA), Lloyd Doggett (D-TX), Jim Gerlach (R-PA), Walter Jones (R-NC), Larry Kissell (D-NC), Robert Latta (R-OH), Michael Rogers (R-AL), Linda Sanchez (D-CA), Jan Schakowsky (D-IL) and Anthony Weiner (D-NY) in a series of letters that among other things called for, "the FTC to reopen the CVS Caremark merger investigation and determine if the acquisition poses a threat of reducing competition or whether CVS is engaging in any unfair or deceptive business practices." 

In August 2009, the FTC heeded those concerns by launching an investigation into CVS Caremark, which later disclosed this development to its shareholders. While the exact nature of the non-public investigation is unknown, the unusual collaboration of the FTC's Consumer Protection and Competition bureaus is believed to be a good sign for community pharmacies and their patients. 

This month, community pharmacists renewed the case against CVS Caremark and presented additional evidence to the enforcement agency. On one occasion, NCPA detailed CVS Caremark tactics that secretly boost the costs to health plans and profitability of its mail order pharmacy. Also brought to the FTC's attention is how aggressive auditing is used to recoup funds from community pharmacies on minor technicalities. 

On the second occasion, the focus was on how CVS Caremark's actions have especially challenged community pharmacies and patients in rural markets, where health care options are more limited. Patients told they can only use CVS Caremark likely face a long trip to the closest CVS or a significant wait for their medicine through the mail. And their access to a local pharmacist who knows their health needs and history is lost. 

NCPA has pursued assistance at other levels, bringing the questionable practices of CVS Caremark to the attention of state and local officials. With CVS Caremark's recent acknowledgement that 24 states and certain other localities areconducting their own investigative efforts, these efforts to rein in the giant corporation are bearing fruit. 

Concerned Members of Congress have been integral to bringing these investigations this far. And they still have a role to play, as evidenced by U.S. Representative Jim Jordan (R-OH), who recently sent a letter to the FTC praising its efforts, but pressing for a resolution to the problem. Both Senators and Representatives should keep up the pressure. Only a thorough investigation coupled with meaningful remedies to restore competition and consumer choice will give patients and community pharmacies relief from CVS Caremark. 

These actions will bring us closer to realizing Milton Friedman's vision of both parties – including patients – benefitting when it comes to the delivery of prescription drug services. 

The full article can be found in The Hill.

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