October 9, 2024

CVS Caremark Settles Charges Over Prescription Prices

The settlement comes at a time of intensive government scrutiny of pharmacy benefit managers like CVS Caremark, which run prescription drug plans for employers and insurers. The F.T.C. is reviewing the proposed merger of the two main competitors to CVS Caremark: Medco Health and Express Scripts.

In the case of Medco and Express Scripts, regulators are examining whether the combination would create a player with too much market share.

With CVS Caremark, the agency looked into whether the merger of one of the largest drugstore chains with one of the largest pharmacy benefits managers had given the company an unfair market advantage in steering customers and obtaining information about competing pharmacies. CVS Caremark works with a network of about 65,000 pharmacies, including more than 7,300 of its own drugstores.

In 2009, some legislators, labor unions, pharmacies and consumer groups raised concerns about potentially anticompetitive and anticonsumer business practices by CVS Caremark. The F.T.C. opened an investigation early that year.

On Thursday, the agency dismissed the more serious allegations of anticompetitive behavior. The agency found only one violation — that one of the company’s Medicare drug plans, then called RxAmerica, misled some consumers about drug prices.

“After a thorough and comprehensive review of other consumer protection and competition issues in this matter, the F.T.C. issued a letter closing the investigation,” the agency said in a news release.

In a statement, CVS Caremark said that the settlement related only to the practices of RxAmerica, a subsidiary of Longs Drug Stores, that took place before CVS Caremark acquired Longs in October 2008. (While much of the incorrect pricing did occur before the purchase, the F.T.C. asserted that some continued after the acquisition.)

CVS Caremark said that the subsidiary had inadvertently posted inaccurate prices for certain generic drugs on a Web site maintained by the Centers for Medicare and Medicaid Services and that the company had rectified the pricing problem upon learning of it.

“CVS Caremark is pleased to have reached an agreement with the F.T.C. that ends the investigation and enables us to continue our focus on offering unique, innovative products and services that differentiate us and benefit consumers,” said Larry Merlo, the chief executive of CVS Caremark, in the statement.

This is not CVS Caremark’s first instance of incorrect pricing. In 2010, the company notified the Centers for Medicare and Medicaid Services that from October 2009 to January 2010, a computer error had caused it to provide incorrect prices — about 4 percent lower than the actual price — for brand-name prescription drugs available through its SilverScript Medicare drug plan. The company offered to refund the price difference to customers who had paid more than they had expected. It also offered to help them switch to another plan.

The F.T.C.’s decision in the current case removes a significant overhang for CVS Caremark. The company said it was currently in discussions with the attorneys general of 24 states and the District of Columbia to resolve a parallel multistate investigation.

In 2006, when CVS proposed to merge with Caremark, executives pledged that the new company would put up a firewall to keep the activities of its stores separate from the benefits manager, which processes prescriptions from competing pharmacies. Thomas M. Ryan, then CVS’s chief executive, said in a conference call with investors in 2006 that the merged company would “be agnostic to where the consumer fills their prescription.”

But pharmacies and consumer groups asserted in their complaints to regulators that the two divisions of the company had shared consumers’ records, steering people to the company’s retail stores and mail-order operations, which gave CVS Caremark an unfair advantage over competitors. At the time, some consumer advocates called for the merger to be dissolved.

The F.T.C. mounted a sweeping investigation, involving its bureau of consumer protection, bureau of economics and bureau of competition — an unusual effort by the agency. But it ultimately cited CVS Caremark for only the RxAmerica violation.

In the statement, Douglas A. Sgarro, the chief legal officer of CVS Caremark, said, “It is important to note that, at the conclusion of this comprehensive investigation, the F.T.C. made no allegations of antitrust law violations or anticompetitive behavior associated with any of our business practices, products or service offerings.”

Industry analysts said the settlement represented a victory for CVS Caremark and a repudiation of the merger’s critics.

Article source: http://feeds.nytimes.com/click.phdo?i=68ec1f9c07bfabfd2e76f74e4566f12d

Prescriptions Blog: Walgreen Projects Loss Without Express Scripts

The Walgreen Company on Tuesday braced Wall Street for a projected loss in 2012 of more than $3 billion in revenue because of the planned loss of business from customers who have their prescription drug coverage managed by Express Scripts, a large pharmacy benefit manager the drug store giant is battling over payment issues.

The proposed merger between Express Scripts and Medco Health complicates matters, given that federal regulators are scrutinizing the deal.

Going without Express Scripts is a high-stakes gamble for Walgreen, the nation’s largest pharmacy chain. Deerfield, Ill.-based Walgreen generated $5.3 billion, or 7 percent, of its $72 billion fiscal 2011 revenue from customers with drug coverage managed by Express Scripts, but the company is hoping to retain some of those dollars.

Much of the rift, which began three months ago, centers on how much Walgreen is getting paid by Express Scripts to dispense prescriptions and how much the benefit manager pays the drugstore giant for the costs of the drugs. Express Scripts is a pharmacy benefit manager, which works as a middleman of sorts between employers and drugmakers when it comes to buying prescription drugs.

“We are planning not to be part of the Express Script network as of the first of the year,” Greg Wasson, the chief executive of Walgreen, told analysts and investors.

In a conference call following the company’s fourth-quarter and full-year fiscal 2011 earnings release, Walgreen executives outlined three “potential” scenarios where they could retain from 25 percent to 75 percent of the customers who have Express Scripts benefit plans.

Depending on retention, Walgreen said the company could experience a negative impact of 7 cents to 21 cents a share for its fiscal 2012, which began Sept. 1 and runs through Aug. 31, 2012. Its contract with Express Scripts expires at the end of this year, leaving open the possibility that some resolution could be reached in the coming months.

To mitigate the threatened loss of business from Express Scripts customers, Walgreen said it had been in talks with large health plans and employers about ending relationships with Express Scripts and contracting directly with Walgreen, but the pharmacy chain would not provide specifics or name companies that were considering leaving.

“We’re not going to speculate on retention,” Mr. Wasson said. “We’re encouraged by the response we are receiving.”

The imbroglio comes at the peak of fall open enrollment season when companies disclose to workers their benefit options for the following year. It’s during this time that workers will be deciding which health plans to choose. In addition, seniors covered by Medicare health insurance for the elderly will also soon be choosing their drug coverage options for 2012.

Both sides say they are trying to provide the best deal to employers while saving the health care system money.

Express Scripts says Walgreen’s fees and costs to provide prescriptions are too high. “We would still welcome back Walgreens in our network at rates that are more aligned with rates that are right for our clients,” said Brian Henry, a spokesman for Express Scripts.

But Walgreen says its rates are in line with the market and it gives customers the best buy at the pharmacy counter with its services that include educating customers and moving them to cheaper generic drugs. Walgreen also markets a program where consumers can get a 90-day prescriptions at the pharmacy counter.

Article source: http://feeds.nytimes.com/click.phdo?i=a44842db8518c1b32bc3730d25658f72

Walgreens Plans to Drop Drug Partner

If the companies do not settle their dispute, people whose prescription benefits are handled by Express Scripts will not be able to get their prescriptions filled at the biggest drugstore chain in the United States, and Walgreens will give up about 7 percent of its annual revenue.

The announcement on Tuesday follows a similar contract fight a year ago between Walgreens and the CVS Caremark Corporation that was resolved less than two weeks after it became public.

The impasse with Express Scripts overshadowed news that Walgreens’ net income climbed 30 percent in its third fiscal quarter.

Walgreens’ stock fell $1.90, or 4.2 percent, to $43.28 a share. Express Scripts rose 20 cents to $54.99 a share.

Walgreens, which has spent months negotiating a new contract with Express Scripts, said it would stop participating in Express Scripts’ prescription plans starting Jan. 1.

Express Scripts is the second-largest pharmacy benefits manager in the United States, and it expects to handle at least 750 million prescription claims in 2011. Walgreens said about 90 million of those prescriptions would be filled at its stores.

Express Scripts, which is based in St. Louis, said that it had been preparing for Walgreens’ departure and that more than 50,000 other pharmacies participated in its network.

Walgreens, based in Deerfield, Ill., also reported that net income grew to $603 million, or 65 cents a share, during the three months ended May 31, up from $463 million, or 47 cents a share, a year earlier when its results were weighed down by costs associated with the health care reform law, its acquisition of the Duane Reade chain and reorganization costs.

Revenue climbed to $18.37 billion from $17.2 billion.

Article source: http://feeds.nytimes.com/click.phdo?i=0234135a50cb1f2afaf8b77a54f4d175