Dive Brief:
- A small Iowa pharmacy is suing CVS over allegations that the company’s pharmacy benefit manager asked for exorbitant and unfair fees to dispense prescriptions for Medicare members, violating antitrust laws.
- Osterhaus Pharmacy is accusing CVS Caremark of forcing independent pharmacies to sign one-sided contracts in order to stay in its network and continue dispensing drugs for its millions of covered lives, putting the pharmacies at a competitive disadvantage.
- The suit seeks class action status to represent other independent pharmacies that have entered contracts with CVS that impose the allegedly illegal fees.
Dive Insight:
PBMs — the drug middlemen that negotiate rebates and fees with drugmakers, create formularies and reimburse pharmacies for prescriptions — have drawn increasing scrutiny from regulators and legislators over their role in rising drug costs.
Currently, the Federal Trade Commission and a number of other government bodies are investigating the companies, while bipartisan legislation that hopes to inject more transparency into PBM arrangements could be voted on in Congress later this year.
Maquoketa, Iowa-based Osterhaus filed the suit Tuesday in a Washington district court. The complaint accuses CVS of violating federal antitrust laws and state contract statutes through its application of performance adjustment fees in Medicare Part D.
The direct remuneration fees allow the PBM to retroactively adjust how much pharmacies are reimbursed based on their quality performance.
Much of the criteria used by CVS to adjust payments “make no sense,” are applied at Caremark’s “complete discretion” or are outside pharmacy control, the lawsuit says. However, opting out of Caremark contracts would “severely limit a pharmacy’s access to a critical mass of patients,” so pharmacies “generally have no practical choice but to participate.”
CVS Caremark is the largest PBM in the U.S., accounting for 33% of all prescriptions filled nationally.
CVS denies the allegations. “We believe the allegations are without merit and intend to defend ourselves vigorously,” CVS Corporate Communications Director Michael DeAngelis said.
The suit is the latest salvo between independent pharmacies and PBMs, two parties that have long been at loggerheads over contracts that include fees the pharmacies say are too high, and reimbursement that the pharmacies say is too low.
Independent pharmacies have been closing across the U.S. but especially in rural areas due to increased financial pressures — including from PBMs, which reimburse independent pharmacists at lower levels than their own in-house pharmacies, independent pharmacists say.
The lawsuit is the latest of CVS’ pharmacy concerns. Last week, pharmacists working at Kansas City locations staged a walkout over working conditions, causing 20 stores to temporarily close. Another walkout was planned for Wednesday and appears to have been carried out at multiple stores. CVS has said it’s working to meet pharmacists’ concerns.
