CVS Health May Have Violated Antitrust Laws, Finds House Judiciary Committee Report
GoLocalProv News Team
CVS Health May Have Violated Antitrust Laws, Finds House Judiciary Committee Report
The report released on Wednesday reveals how CVS Health is stifling innovation by threatening independent pharmacies that work with potential competitors.
CVS is headquartered in Woonsocket and is one of Rhode Island's largest employers.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe company said the report is "misguided." See CVS's full comments below.
The House Judiciary Committee said, "According to documents produced to the Committee, CVS Health developed a plan to invest heavily in the digital pharmacy sector. CVS Health saw online pharmacy services as the future and feared falling behind if it did not develop its own hub pharmacy to compete against innovative companies. After surveilling rival hubs and investigating independent pharmacies that work with those hubs, instead of vigorously competing, CVS Health took action to foreclose competitor access to independent pharmacies."
A portion of the report states:
Internal CVS Health documents produced to the Committee show that CVS Health acted to stifle innovation and reduce competition from hub pharmacies, which are companies that provide various digital pharmacy services to support consumer choice and price transparency. These documents show that CVS Health developed plans to establish its own suite of digital pharmacy services and then, instead of competing with hubs on the merits of their services, prevented independent pharmacies from using pharmacy services from hubs. To achieve this, CVS Health monitored the business relationships of independent pharmacies and hubs, modified its provider manual to create uncertainty for independent pharmacies working with hubs, used the modified provider manual as a pretext to audit independent pharmacies, and sent cease-and-desist letters to those independent pharmacies found to be working with hubs.
Nonpublic documents produced to the Committee show that CVS Health:
- Learned how the hub model operated and then changed its network rules to stop independent pharmacies from working with hubs;
- Used audits and cease-and-desist letters against independent pharmacies to foreclose competitor access and restrict options for independent pharmacies; and
- Leveraged its PBM pharmacy network to eliminate competition.
"Faced with the Committee's investigation, CVS Health backed down and allowed independent pharmacies to work with one hub. It is possible that CVS Health's conduct violated the antitrust laws. CVS Health's own CEO characterized his company's actions best by writing: 'another example of a large PBM not allowing the small guys to compete,'" claims the Committee.
The rise of hub pharmacy technology presents new questions about the sufficiency of existing laws. Although current antitrust law may address CVS Health's conduct with respect to hubs and innovative technologies, Congress may consider legislative reforms to better address this emerging anticompetitive conduct in the pharmaceutical industry.
CVS Response
David Whitrap, Vice President, Communications for CVS said, "CVS Caremark works to make prescription drugs more affordable in the United States, while ridding the pharmaceutical supply chain of potential fraud, waste, and abuse (FWA). This report is misguided, misleading and inaccurate."
He added, "Pharmaceutical hubs do notreceive unfair scrutiny from Caremark. As an initial matter, Caremark does notinteract directly with hubs, whichrecruit pharmacies to partner with them, and those pharmacies were subject to the same rules as all other pharmacies who work with Caremark. The healthcare industry monitors for FWA — activities that cause higher costs for patients, plan sponsors, and taxpayers. Fraud includes prescriptions written and dispensed without a patient’s knowledge or consent, or with the patient’s active participation in the fraud. Abuse may include activities such as hyper-inflated billing."