Former CVS exec accuses it of ripping off seniors, taxpayers

Whistleblower said health care giant illegally drove up drug costs

By: - June 28, 2022 3:50 am

Photo by Marty Schladen, Ohio Capital Journal.

The top leadership of CVS Health directed an illegal scheme to work across the corporation’s sprawling subsidiaries to drive up drug prices in the Medicare program, says a whistleblower suit that was recently unsealed in the Eastern District of Pennsylvania.

It accuses CVS of breaching firewalls between its SilverScript prescription drug plan, CVS Caremark, its pharmacy middleman, and its vast chain of retail stores. The scheme is intended to block seniors’ access to cheaper generic drugs in exchange for big rebates from the manufacturers of the drugs that were covered, the suit alleges.

The lawsuit, which was first reported by Stat News, comes after years of suspicion in Ohio that CVS’s firewalls have been less than impregnable. And it comes after the Federal Trade Commission earlier this month said it would investigate whether health giants like CVS were using their “vertical integration” — dominance in several aspects of health care — to engage in anticompetitive practices

Collusion between divisions of CVS “has created a veritable playground of opportunities to hold off generic (drug) competition, allowing the Drug Makers free reign to block beneficiary access to less costly generic drugs, frequently authorized generics,”  the whistleblower suit says.

It adds, “This obstruction would otherwise have been impossible if the CVS Health entities had not colluded together, particularly given their different competing interests, which were supposedly firewalled off from each other because of a 2007 agreement with the Federal Trade Commission (“FTC”) at the time of the merger between CVS and Caremark.”

CVS didn’t immediately respond to a request for comment, but it told Stat News that it intended to “vigorously defend” itself against the suit.

The whistleblower in the suit is Alexandra Miller, whose LinkedIn page lists her last position with CVS as senior director of Medicare Part D operations.

Part D is the prescription drug benefit for American seniors that started in 2006. Unlike other Medicare benefits, seniors must use privately owned “prescription drug plans” to take advantage of the drug coverage.

SilverScript contracted with its corporate sibling, CVS Caremark, to be its pharmacy benefit manager. In that role Caremark creates pharmacy networks and determines pharmacy reimbursements.

Caremark also creates “formularies,” lists of drugs that are covered by Medicare Part D. In exchange for placement on those lists, drugmakers pay pharmacy benefit managers, or PBMs, big rebates and other fees.

The suit accuses SilverScript, CVS Caremark and CVS retail stores of working together to disallow coverage of cheaper, multi-source generics for at least 15 drugs. They include medicines for multiple sclerosis, dementia and even opioid addiction.

Even though they’re covered, more expensive drugs cost seniors because their copayments are based on those higher prices. Inflated drug prices also cost taxpayers several ways — including by more quickly pushing Medicare recipients into the catastrophic phase of coverage, which is more expensive for taxpayers. 

“Plan sponsors that collude with others to increase prices for Part D drugs not only rob taxpayers, they cheat beneficiaries who often are forced to ration or abandon their medications altogether,” the whistleblower suit says. “This is particularly insidious when this conduct increases prices for expensive drugs that force their Part D coverage into the Catastrophic Coverage Stage where beneficiaries face substantial additional costs.”

In Ohio, CVS has been accused of breaching its firewalls on at least two occasions. 

In late 2016, CVS Caremark’s reimbursements to community pharmacies under the state Medicaid program plummeted. A separate CVS division then sent letters to some pharmacies saying that it knew reimbursements were down and offering to buy them out.

In 2019, The Columbus Dispatch obtained confidential data showing that in 2017, CVS Caremark would have had to pay Walmart and Sam’s Club pharmacies 46% more for generic drugs if CVS were to equal the rates it was paying its own pharmacies. The same report said that Caremark would have had to pay Kroger pharmacy 25% more to equal its treatment of CVS pharmacies.

Less than two years earlier, CVS bought Target’s pharmacies, making CVS a direct competitor with Walmart, Sam’s Club and Kroger in the big-box pharmacy business. CVS insisted that it was basing its reimbursements on an objective system.



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Marty Schladen
Marty Schladen

Marty Schladen has been a reporter for decades, working in Indiana, Texas and other places before returning to his native Ohio to work at The Columbus Dispatch in 2017. He's won state and national journalism awards for investigations into utility regulation, public corruption, the environment, prescription drug spending and other matters.