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Unfair competition accusations accompany revenue rise
The pharmacy benefit management (PBM) business of CVS Caremark Corp. outpaced the pharmacy side in first-quarter figures released by the Woonsocket, RI-based prescription drug provider. PBM network revenues climbed 6.8% in the quarter, according to an announcement. The company says it expects revenue from its PBM business to grow 15% to 17% this year, thanks to an accounting change that will increase revenue, but not profit.
On the pharmacy side, services revenues increased 7.2% to $11.5 billion, while the retail pharmacy segment rose 13.9% to $13.5 billion. Pharmacy same store sales climbed 4.6%; they were “negatively impacted due to recent generic introductions,” the company says. It opened 39 new retail pharmacy stores in the quarter, while closing 50. It also closed five specialty pharmacies and one mail order facility. The company now operates 6,912 retail pharmacy stores, 52 specialty pharmacy stores, 20 specialty mail order pharmacies and six mail order pharmacies in 43 states, the District of Columbia and Puerto Rico. CVS Caremark also reports that generic dispensing in the PBM segment increased 360 basis points to 68% during the quarter; that in its retail segment increased 260 basis points to 69%.
Crossover between the PBM and retail parts of the business—which was inherent in the merger of CVS and Caremark in 2007—is drawing more criticism. According to several Wall Street Journal reports, CVS produced 1.2 percentage points of its in-store pharmacy sales through a program called Maintenance Choice, which steers PBM customers toward CVS stores to fill prescriptions. More recently, the WSJ says that individual reports are cropping up of patients being hit with much higher co-pays when they do not use a CVS pharmacy. (Mail-order deliveries are presumably handled differently.)
The National Community Pharmacists Association has accused the company of waging unfair competition and has asked for a Federal Trade Commission investigation. The association charges the company with using patient information from the PBM business, coupled with co-payment manipulation, to steer patients to its pharmacies and drug mail-order businesses.
CVS Caremark says the association mischaracterizes its business practices, according to reports. Nor is it clear that there is any improper activity going on; the FTC has yet to comment on the accusations.