Sep 28, 2023 - Health

CVS Caremark sued over back-end pharmacy fees

Illustration of a gavel made of a pill bottle, touching a gavel rest made of a white pill.

Illustration: Shoshana Gordon/Axios

Community pharmacies in a new lawsuit claim CVS Health and its Caremark pharmacy benefit manager violated antitrust laws and illegally collected fees from pharmacies that fill Medicare prescriptions.

Why it matters: If the Iowa pharmacy leading the lawsuit prevails, CVS will have to return hundreds of millions — if not billions — of dollars its PBM recouped from independent pharmacies over the past four years, according to a lawyer for the National Community Pharmacists Association.

  • The lawsuit comes as CVS Caremark and other PBMs face heat from Congress for their business practices. Bipartisan legislation addressing PBM transparency could be brought to a vote later this year.

Driving the news: Osterhaus Pharmacy in Maquoketa, Iowa, claims the fees CVS Caremark has been charging independent pharmacies under a Medicare value-based contracting program violate federal antitrust laws and state contract statutes.

  • The company filed a proposed class-action lawsuit in the Western District of Washington this week.
  • Caremark believes the allegations are meritless and will defend itself vigorously, a spokesperson told Axios.

Catch up quick: Medicare prescription drug plans and their PBMs can adjust how much they reimburse pharmacies for dispensing Part D drugs based on the pharmacies' quality performance. Adjustments often come weeks or months after the sale of a drug.

  • The lawsuit claims Caremark exploits the pay-for-performance system by delaying its adjustments "without a legitimate reason."
  • Many of the performance criteria Caremark uses make no sense for pharmacies, the lawsuit says. But opting out of a contracting arrangement with Caremark would "severely limit a pharmacy's access to a critical mass of patients," the lawsuit states.

What they're saying: The performance adjustment fees "do nothing more than line the pockets of PBMs like Caremark. It's a mafia-style shakedown," Douglas Hoey, CEO of the National Community Pharmacists Association, said in a statement.

  • The lawsuit is a "chance to claw back the clawbacks," NPCA's statement said.

By the numbers: Retroactive quality performance fees grew by more than 107,400% between 2010 and 2020, the Centers for Medicare and Medicaid Services reported last year.

Of note: Starting January 1, Medicare prescription drug plans and PBMs will not be able to retroactively recoup performance-based adjustment fees from pharmacies.

  • PBMs will still be able to adjust pharmacy reimbursement for quality performance at the point of sale.

Go deeper: How a slate of PBM reforms could impact the pharmacy business

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