Congressman asks regulators to slow CVS/Aetna merger, citing Arkansas pharmacy controversy
Written by: Benjamin Hardy
Published by: Arkansas Nonprofit News Network

LITTLE ROCK, Ark. (ARKANSAS NONPROFIT NEWS NETWORK )- On Thursday, U.S. Rep. Rick Crawford (AR-1) sent letters to federal regulators stating his “grave concern” over the proposed acquisition of Aetna, Inc., one of the nation’s largest insurance companies, by CVS Health, a Rhode Island-based healthcare conglomerate that has been at the center of a political showdown in Arkansas.

The congressman wrote that CVS Caremark — a subsidiary of CVS Health — has “run amok in my state by severely undercutting reimbursements to pharmacists.” CVS Caremark is a pharmacy benefits manager, a middleman company that negotiates drug prices with manufacturers on behalf of insurance carriers. PBMs also handle retail pharmacy claims.

Independent pharmacies in Arkansas say CVS Caremark, which is the PBM for insurer Arkansas Blue Cross and Blue Shield, recently slashed its payments for Blue Cross patients so deeply that drugstores now lose money when they fill many prescriptions. That has resulted in layoffs and may lead to store closures, according to the Arkansas Pharmacists Association.

The state legislature is now considering legislation that would subject PBMs to regulation by the Arkansas Insurance Department. Governor Hutchinson was expected to call a special session to address the issue as early as next week after the 2018 fiscal session concludes. But Crawford’s letters to U.S. Attorney General Jeff Sessions and U.S. Federal Trade Commission Acting Chair Maureen Ohlhausen may add a new dimension to the fight.

In December, CVS Health announced plans to acquire Aetna for $69 billion. CVS, which also owns the country’s largest retail pharmacy chain, is already ranked as the seventh-largest corporation in the U.S. by Fortune magazine, and critics of the deal say it would give one company too much leverage over the health care system. The Department of Justice and the FTC are empowered under federal antitrust law to stop such an acquisition if it is shown to hurt consumers.

“Left unchecked, the vertical integration of PBMs could destroy competition in community pharmacies, leaving patients with broken provider-patient relationships, higher costs, and less access to patient-centered care,” Crawford wrote Sessions and Ohlhausen. “Merging two entities with such a large footprint within the drug supply chain will only exacerbate problems with respect to pharmacy access, especially in underserved areas, like the First District of Arkansas.”

In an interview Wednesday morning, Crawford said he was speaking out against the CVS/Aetna deal because of the actions of CVS Caremark and other PBMs in Arkansas. Crawford, whose brother-in-law is a pharmacist in Missouri, said pharmacies are “a critical part of our healthcare model in rural America.

“Historically, I stay in my lane — I work on federal issues … but the lanes merged here with health care, and so I need to provide a level of support to my counterparts at the state level,” Crawford said. What’s happening in Arkansas is “a case study for … why they shouldn’t allow that type of merger to take place,” he added.

Crawford cited an example of so-called “spread pricing,” in which a PBM charges an insurance company a much higher rate for a particular drug than the rate at which it reimburses a pharmacy for the same product. According to data provided by the Arkansas Pharmacists Association, it recently cost an independent pharmacy in Arkansas about $91 to buy the generic equivalent of Tamiflu, a popular antiviral, from a drug wholesaler. When a Blue Cross patient filled a prescription at the pharmacy, CVS Caremark only reimbursed that pharmacy about $36 for the drug. That meant the pharmacy lost $55 by filling the prescription.

Meanwhile, Blue Cross has paid CVS Caremark about $133 for the reimbursement — meaning $96 of the cost of the reimbursement ostensibly went to the PBM. Blue Cross is by far the largest insurer in Arkansas, and the company covers a majority of beneficiaries on Arkansas Works, the state’s public-private approach to Medicaid expansion.

“The question is, where is this money going?” Crawford asked. “To say it’s unfair is really a huge understatement. I think it’s possibly illegal — it just looks illegal — and it certainly looks unethical.”

When asked last month about allegations of unethical or illegal pricing in Arkansas, a spokesperson for CVS Health responded by email: “The Arkansas Pharmacists Association is painting an overall skewed picture of how CVS Caremark reimburses pharmacies. We believe that independent pharmacies in our network are reimbursed fairly and that we are in compliance with state law. It is important to note that APA has repeatedly refused to share specific claims data with us to validate their allegations.”

Crawford acknowledged that opposing the Aetna merger won’t directly address the Arkansas pharmacy reimbursement issue.

“I’m not sure if there’s anything we can do at the federal level to address this Arkansas-specific problem … I think it’s going to require an Arkansas solution,” he said. “But what I can do at the federal level is raise this question in general terms that, ‘Is it good to see this kind of consolidation and vertical integration in the healthcare industry?’ ”

He also said the problem of PBMs squeezing pharmacies extended well beyond Arkansas. “This is happening all over the country. Pharmacists have been visiting members of Congress for the last two years with this complaint,” Crawford said. “We’ve kind of reached a boiling point … and while all this is going on, then you see these two companies [CVS and Aetna] seeking to merge and further consolidate control of a large portion of the healthcare industry.”

“Left unchecked, the vertical integration of PBMs could destroy competition in community pharmacies, leaving patients with broken provider-patient relationships, higher costs, and less access to patient-centered care,” Crawford wrote Sessions and Ohlhausen. “Merging two entities with such a large footprint within the drug supply chain will only exacerbate problems with respect to pharmacy access, especially in underserved areas, like the First District of Arkansas.”