CVS is accused of overcharging Medicaid to drive out competition: 8 things to know

CVS stands accused of boosting its profits by overbilling Medicaid managed-care companies for medications and underpaying pharmacists for the drugs in an effort to push out competition in Ohio — a charge the pharmacy giant denies, according to The Columbus Dispatch.

Here are eight things to know.

1. Critics in Ohio claim retail pharmacies in Ohio have been forced to close as a result of the Medicaid-benefits management system CVS dominates with its pharmacy benefits management arm, CVS Caremark. Antonio Ciaccia of the Ohio Pharmacists Association told The Dispatch 165 Ohio pharmacies have shuttered in the past two years.

2. Ohio's Medicaid program is forecasted to spend $3.2 billion on prescription drugs in the state in 2018. CVS Caremark will handle most of that money, according to the report. CVS Caremark bills insurers that contract with the state's Medicaid program and is responsible for reimbursing pharmacies that fill those patients' prescriptions.

3. The state contracts with five managed-care companies to coordinate healthcare services for 89 percent of Medicaid patients at a set fee. The managed care company then hires pharmacy benefit managers, who decide which drugs are covered with insurance, negotiate rebates with drugmakers and set the reimbursement prices for pharmacies.

4. According to The Dispatch, not only is CVS the second-largest retail pharmacy chain in the state, CVS Caremark is also the pharmacy benefit manager for four of Ohio's five managed-care companies, which keeps it in charge of the majority of reimbursements to pharmacists.

5. Mr. Ciaccia suspects CVS Caremark is using "spread pricing" to fatten its bottom line. Spread pricing is using one list with low prices to reimburse pharmacists and using another list with high prices to bill the managed-care company. In this scenario, the PBMs would pocket the difference in cost. Mr. Ciaccia noted it is impossible to know if CVS Caremark or other PBMs use this method because the entire process is not transparent.

6. A CVS spokesperson declined to answer The Dispatch's questions about whether the company engages in spread pricing, but noted "there are strict firewalls between our retail business, CVS Pharmacy, and our PBM business, CVS Caremark. CVS Pharmacy has no insight into CVS Caremark's reimbursement of independents."

7. Ohio House Finance Committee Chairman Ryan Smith, R, told The Dispatch, "Independent pharmacists are getting killed. Their rates are going down, but prescription costs are going up. It seems like the middleman is making out."

8. After the accusations surfaced, state officials said they would look into the overbilling accusations against CVS, according to The Alliance Review.

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