Tennessee audit: CVS Caremark's affiliated pharmacy reimbursements

A Tennessee audit found CVS Caremark engaged in a prohibited practice: reimbursing its affiliated pharmacies more than non-affiliated pharmacies for the same drugs.

Up to 16,510% more per unit.

Two examples from the report:

Cinacalcet 60mg: CVS pharmacies received 16,510% more per unit than non-affiliated pharmacies.

Tadalafil 20mg: 9,927% more per unit.

The auditors didn’t pull their punches: “the Company engaged in a prohibited practice of reimbursing its affiliates more for a prescription drug or dispensed product than non-affiliates.”

As I channel my inner Billy Mays: “but wait, there’s more!”

The audit flagged 661 of 3,646 dosages sampled. It also found continued spread pricing after Tennessee banned the practice in 2021, failure to pay required dispensing fees to rural and low-volume pharmacies, and violations of the statutory appeals process.

Meanwhile, as the legislature advanced a bill to bar PBMs from owning pharmacies, CVS threatened to close all 134 Tennessee locations and eliminate 2,000 jobs.

Lawmakers said it was a scare tactic, saying divestiture doesn’t mean closure.

Wendell Potter has a good write-up on the playbook in his Substack: “With CVS’s Vertical Empire Under Threat in Tennessee, the Company Threatens to Leave.”

And Martha Shephard, a Tennessee pharmacist, put it even more plainly: CVS can’t survive if it has to take the same reimbursements it pays non-affiliated pharmacies.

The questions plan sponsors should be sitting with:

When the same parent company owns the insurer, the PBM, and the pharmacy, who is the PBM negotiating for?

Links to the audit, Wendell Potter’s Substack, and Martha’s letter to the editor in the comments.

(If this post gets 100 likes I’ll put my picture of me in my Billy Mays costume from years ago!)