CVS Health and its subsidiaries have experienced a turbulent week in the courts.
A former Aetna actuary in the Medicare department won a $95 million False Claims Act judgment (PDF) against pharmacy benefit manager Caremark on Wednesday. She alleged Caremark prompted health insurers to misrepresent to the government the price paid for prescription drugs for Medicare beneficiaries. Importantly, the lawsuit claimed Caremark contracted with pharmacies to pay a fixed average price but caused higher prices to be reported.
Also named in the lawsuit were SilverScript Insurance, Walgreens and Rite Aid.
Caremark’s contracts with CVS pharmacies did not include generic effective rate (GER) guarantees, or a promise to pay an average price for drugs over a year. Instead, from 2013 to 2016, contracts with CVS pharmacies had budgeted GER, which were created by senior CVS executives, to ensure “that the planning assumptions for both businesses would align,” a former chief accounting officer for CVS said during trial.
Caremark would then change maximum allowable cost prices for commercial drugs to make sure the budgeted GER was met. Former employees say budgeted GERs were treated as a “forecast” but could change throughout the year, unlike a contractual GER.
“Unlike the contractual GER guarantees, the budgeted GERs between Caremark and CVS Pharmacy did not provide for a reconciliation or ‘claw back’ if Caremark underpaid relative to the budgeted GER,” the lawsuit explained, noting Caremark did not make any true-up payment to the pharmacy business in 2015, as would have been required otherwise.
“The evidence does not show that CVS Pharmacy and Caremark engaged in some arms-length negotiation or bargaining,” the judge said in the ruling. “Rather, it is more consistent with a parent company—CVS Health—listening to each subsidiary’s position and then implementing a budgeted GER aimed at benefiting the company as a whole.
Meanwhile, in Louisiana, Attorney General Liz Murrill, a Republican, alleged in three separate lawsuits filed this week that CVS Health and its PBM have engaged in deceptive and unlawful business practices.
The first lawsuit (PDF) claims CVS sent text messages to members June 11 urging customers to oppose proposed state legislation that would ban Caremark from owning pharmacies. CVS said the bill would force the company to close 119 pharmacies in the state, affecting 1 million patients and putting 2,700 employees out of work. Lawmakers reacted angrily to CVS’ texting campaign, reported The New Orleans Advocate.
“I believe CVS used their customers' personal information that was given to them to fill their prescription, to lobby for their own corporate interests against pending legislation in the State Legislature,” she said in a statement. “PBMs are not managing the costs of drugs—they are driving the price up! CVS and other PBM’s continue to hide behind various confidentiality clauses to cover up the way they are manipulating drug prices—it’s wrong and unlawful.”
Murrill’s office said the campaign was designed to “incite fear” among members, and personal information was wrongly used “under the guise of prescription and health notifications” to instead lobby on policy issues.
“This month, CVS went too far by sending a politically charged and unethical message to its customers, and we won’t let that go unanswered,” said Louisiana Gov. Jeff Landry in a statement.
One CVS text read: "CVS Pharmacy: Last minute legislation threatens to close your CVS Pharmacy - your medication cost may go up and your pharmacist may lose their job."
Another lawsuit (PDF) says Caremark’s grip on the pharmaceutical supply and reimbursement chain gives CVS unwarranted power through horizontal and vertical integration. Additionally, the attorney general says Caremark’s use of rebates and a group purchasing organization allows the company to “obscure” costs and “enable double dipping of rebates and administrative fees.”
Finally, a third lawsuit (PDF) says CVS abuses its market power to impose “exceedingly high fees” on other pharmacies. The company practices spread pricing, a tactic opposed by bipartisan lawmakers at the federal level, and threatens to exclude pharmacies from its network, Murrill said.
This is a developing story.