CVS accused of overbilling feds $600M in scheme similar to one in Ohio

The federal government on Friday accused a drug middleman owned by CVS Health of overbilling a program that covers 9 million federal employees by $615 million over a four-year period.

The audit’s findings were similar to those found by one commissioned by the Ohio Department of Medicaid in 2018. It found that pharmacy middlemen owned by CVS and UnitedHealth billed the state $224 million more for drugs that it paid pharmacists in 2017.

CVS said that the latest audit comes after the Office of Personnel Management changed its rules to bring more transparency to the activities of pharmacy benefit managers, or PBMs. The audit covered transactions from 2018 through 2021.

“This is fundamentally a retroactive contract dispute that is occurring after (the Office of Personnel Management) updated its transparency guidelines,” CVS spokeswoman Shelly Bendit said in an email.

“Notably, the audit lists no concerns regarding patient safety, drug access, fraud, reimbursements to network pharmacies, or drug rebates. We support clear standards and continue to work within OPM’s updated framework to ensure accountability, transparency, and value for federal employees.”

The inspector general recommended that the Office of Personnel Management demand that CVS repay about $600 million.

CVS Caremark — CVS’s PBM — was handling drug transactions on behalf of Blue Cross and Blue Shield, which provided health insurance for the Federal Employees Health Benefits Program. 

CVS Health, UnitedHealth Group, and Cigna-Express Scripts each are among the 15 largest corporations in the United States. And each owns one of the three largest PBMs.

Critics have long said the marketplace for pharmacy middlemen is overconcentrated, with the big three PBMs controlling nearly 80% of insured drug transactions. The companies create pharmacy networks and they decide which drugs insurance will cover. 

They use their market dominance to extract large, often non-transparent rebates from drugmakers in exchange for insuring their products. Research has shown that the latter practice drives up list prices for drugs.

PBMs also decide how much to reimburse pharmacies that dispense them.

The health conglomerates that own the PBMs operate in many aspects of the health care space — including running pharmacies of their own.

Critics say that gives them an incentive to give better deals to their affiliated businesses. 

Independent and small-chain pharmacies say that because the big PBMs control access to so many patients, they have no choice but to accept whatever reimbursements are offered.

In recent years, thousands have closed their doors.

One fix that has been proposed is to shine more light on the middlemen’s activities. 

The PBMs use a dizzying array of price lists, the vast majority of which are secret.

They also charge pharmacies a variety of fees. So while they say they use their heft to save their clients money, those clients often have to take it on faith that they’re getting a fair share of what PBMs are extracting from pharmacies and drugmakers.

In 2018, The Columbus Dispatch obtained secret reimbursement data from dozens of Ohio pharmacies, and compared that with amounts providers for Ohio Medicaid were paying CVS Caremark and UnitedHealth’s PBM, OptumRx.

It appeared that the middlemen were getting a lot more taxpayer dollars than were making their way to small pharmacies.

The investigation prompted the state to obtain all of the PBMs’ reimbursement data. An analysis revealed that the PBMs pocketed nearly a quarter-billion dollars in a year without touching a single pill.

The federal audit released Friday found something similar.

“We found that the PBM overcharged the (Blue Cross Clue Shield) and the (Federal Employee Health Benefit Plan) $615,148,628 by not passing through all discounts, credits and financial benefits related to prescription drug pricing as required under the PBM Transparency Standards under” Blue Cross Blue Shield’s contract with the Office of Personnel Management, the audit said.

Of that amount, CVS didn’t pass through $480 million in discounts it negotiated with two large retail chains, and $109 million in fees it collected from pharmacies, the audit said.

This story is republished from the Ohio Capital Journal. View the original article.