WOONSOCKET – CVS Caremark Corp. is under fire once again, this time from a group of independent pharmacists who say the pharmacy giant is using its benefits management division to drive customers away from competing retail pharmacies.
Representatives of the Alexandria, Va.-based National Community Pharmacists Association (NCPA) met on Wednesday with Jon Leibowitz, chairman of the Federal Trade Commission, to lay out their concerns about alleged “anticompetitive and deceptive conduct” by the company and to request a formal FTC investigation of the Woonsocket-based company. The trade group opposed the original merger that created CVS Caremark in 2007.
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After the meeting, the group’s president, Holly Whitcomb Henry, said she was “cautiously optimistic” because Leibowitz told them the issues described were “of concern,” according to Dow Jones Newswires. She said the group wants a strict separation between CVS’ retail pharmacy operation and its prescription benefits management service, Reuters reported.
Lisa Gill, an analyst at JPMorgan & Chase Co., wrote in a note to investors that she would not be surprised if the Obama administration’s FTC looked into the CVS merger, but said she believed the company would not be adversely affected by it. Administration officials this week said they plan to pursue antitrust violations more vigorously than the Bush administration did.
“The new leadership, and in particular Jon Leibowitz, are very much interested in health care and rising health-care costs,” Robert W. Doyle Jr., a former FTC lawyer, told The Wall Street Journal. “If you can show the combined firm, CVS Caremark, is exercising some market power to the disadvantage of consumers or in this case independent pharmacists, then you might be successful in getting him to reopen this case,” he said.
The pharmacists group’s complaint is just the latest in a string of recent allegations that the 2007 merger that created pharmaceutical giant CVS Caremark Corp. has led to higher prescription drug prices for Americans. Last week, a group of state legislators from different parts of the country also asked the FTC to investigate the company.
“We disagree with NCPA’s mischaracterization of our business practices,” CVS Caremark spokeswoman Carolyn Castel told Dow Jones.
“The merger of CVS and Caremark is, in fact, making pharmacy health care more accessible, more effective and more affordable,” she said. “Our integrated pharmacy and PBM operations provide greater choice and more convenience for patients, improve health outcomes, and lower overall health care costs for plan sponsors and participants.”
CVS executives are holding meetings with analysts and investors in New York today. Goldman Sachs recently identified CVS Caremark as one of the 10 stocks its analysts think are “structural winners,” meaning they are well-positioned to profit from broader economic and demographic trends – in CVS’ case, an aging population with increased health care needs.
But in a note to clients yesterday, Scott Mushkin, an analyst at Jeffries & Co. in New York, warned that CVS is being pilloried and needs to push back harder against all the bad publicity or risk suffering long-term damage to its corporate reputation.
“Reminiscent of Wal-Mart, which earlier this decade stood dumbfounded as entrenched interests tore at its reputation due to its market strength and competitive advantages, CVS also looks impotent based on a rising swell that is determined to use any and all means to tear it down,” Mushkin wrote, according to Reuters. “It is time for the company to launch a meaningful counter assault.”
In an article this week about the independent pharmacists’ concerns, The Wall Street Journal reported that CVS Caremark “is apparently steering its pharmacy-benefits patients to its own drugstores by raising copayments for some who fill their prescriptions at other pharmacies.”
The paper said it had reviewed letters sent to individuals who have their prescription benefits managed by CVS Caremark. The letters informed patients that they would be charged a higher copay – in some cases double the current amount – if they continued to fill their prescriptions at an unidentified competing pharmacy, and advised them to switch their pharmacy to CVS.
“Additional fills at this location would be subject to an increased copay,” one letter received by a patient in Connecticut said, according to The Journal. “However, when you call the phone number listed above, we can help you save money with a 90-day prescription through CVS/pharmacy or CVS Caremark Mail Service Pharmacy.”
CVS has created a “maintenance choice” program that allows customers to pay the same price for prescriptions whether they are shipped by mail or picked up in a CVS/pharmacy store.
In a letter received by a California patient, CVS said it no longer would cover prescription refills at a competing pharmacy that the patient had been using, The Journal reported.
In a statement to The Journal, CVS said “it is not uncommon to have some variation in pharmacy-reimbursement rates and prescription prices within retail pharmacy networks administered by PBMs,” and added that its programs are “consumer friendly.” However, the company did not directly address the issues raised in the letters and by the independent pharmacists, The Journal said.
CVS Caremark Corp. (NYSE: CVS) operates CVS/pharmacy stores; the CVS.com online pharmacy; Caremark Pharmacy Services; and the MinuteClinic retail-based health care subsidiary. Additional information is available at investor.CVS.com.
