Dear Colleague,
I couldn't help but note thick irony when reports of CVS Health potentially breaking apart its 3-headed monster-opoly were reported by Reuters. NCPA objected to CVS and Caremark's 2007 unholy matrimony and again in 2018 when Aetna was added to the vertically integrated cocktail. Now with rumors swirling of the possibility of the CVS retail stores being spun off with or without Caremark, I can't help but think that a whole lot of time and effort could have been saved if the FTC and CVS had just listened to our advice from the beginning.
Back then, NCPA asked the FTC to investigate the first acquisition which they eventually did—only after some Congressional nudging—and proceeded to sit firmly on their hands. The only thing unusual about that response for the FTC of that era was that they didn't actively cheerlead the merger as the FTC often did in those days. So fawning was the FTC's affection for PBMs in those days that today's FTC, focused on anti-competitive and anti-consumer elements, retracted its starry eyed PBM fan mail reports.
If CVS were to break off one of its three business units, analysts suggest that one of the questions is, does Caremark go with Aetna or CVS? From my point of view, that seems like an easy decision. Of course, Caremark would go with Aetna. Specialty pharmaceutical dollars are increasingly falling on the medical side of the benefit rather than the pharmacy side. Given the choice of blatantly coercing patients into your own mail order pharmacy under the pharmacy benefit or blatantly steering patients into your mail order pharmacy under the medical benefit using your health insuror, it seems obvious that the latter would be chosen.
When it comes to CVS Health potentially splitting into two companies as a solution for the false promises of vertical integration, it would only be half a loaf. A combined company of Aetna and Caremark could still steer patients to the providers and drugs of their choice (as opposed to the provider's or patient's) and an actual separation of conflicts of interest between the CVS retail stores and the new company would have to actually be enforced.
Today's FTC is concerned about vertical integration and has made no bones about it, which has angered the PBMs. That's showing up in the Wall Street Journal's editorial board, which just this week has written not one but TWO (Google: "WSJ loves PBMs") editorials defending PBMs and battering the FTC and Lina Khan, the WSJ editorial board's vilaness. WSJ subscribers reading this should consider asking themselves how the WSJ editorial board could possibly defend PBM business practices—specifcally those associated with insulin. Insulin prices in the U.S. are probably the most stark examples of how PBMs drive up the costs of prescriptions for their own profiteering. Of note, Express Scripts' full-page ad in the WSJ—this time about their wonderful stewardship of insulin prices—published the day after the WSJ editorial board bashed the FTC for going after the PBMs insulin pricing business practices. Just a coincidence? Uh, yeah. Sure.
There is even more irony if the rumors of CVS spinning off some of its business units are true. If CVS retail stores were spun off and truly asked to stand on their own, they would face a dose of the reality of the atrocious pharmacy reimbursement environment that has shuttered thousands of pharmacies, contributed to RiteAid's declarations of bankruptcy, and hammered Walgreens. Perhaps eating their own cooking would be good for the corporation and help them realize that their vertical integration was not only bad for their investors but bad for competition and for patients.
Best,
B. Douglas Hoey, Pharmacist, MBA
NCPA CEO
P.S. NCPA's Annual Meeting kicks off three weeks from tomorrow. Register today. It's going to be a good one.
