State hits CVS pharmacy benefit company with $1.5 million fine
by Deborah Yetter, Louisville Courier Journal –
Under Gov. Matt Bevin’s Medicaid plan, it actually will cost Kentucky more to provide health coverage to people affected by the Medicaid changes than if the state did nothing. Mary Ann Gerth/Courier Journal
This story may be updated.
Kentucky has hit a national pharmacy benefit management company with a $1.5 million fine, finding that Caremark PCS Health, an affiliate of drugstore chain giant CVS, committed hundreds of violations in processing claims of individual pharmacies.
The state Department of Insurance also put on probation for one year the company that dominates Kentucky’s Medicaid prescription drug business, processing most of the pharmacy claims for the $11 billion-a-year government health plan for low-income and disabled people.
“The department simply does not issue penalties of this nature lightly,” said Patrick D. O’Connor II, the insurance department’s deputy commissioner for policy. “However, we have to ensure companies fully comply with our laws to protect consumers and other businesses.”
The department found violations in 454 claims for reimbursement, according to a news release Monday. It also found 38 violations in cases where Caremark provided inconsistent or inaccurate information to the department, it said.
A Caremark spokesman did not immediately respond to a request for comment.
Caremark operates in Kentucky as a pharmacy benefit manager, acting as a middleman in processing prescription drug claims pharmacists file seeking reimbursement from health plans including Medicaid. The company handles claims for four of the five outside managed care companies that oversee about $7.3 billion of the state’s Medicaid business.
While little known outside the industry, pharmacy benefit companies have drawn fire in Kentucky from the state’s about 500 independent pharmacies, who say the outside companies routinely cut costs at their expense and refuse to pay them full reimbursement.
“We were losing money on every Medicaid prescription,” said pharmacist Rosemary Smith, who owns six independent drugstores in Eastern Kentucky with her husband, Luther, also a pharmacist.
Rosemary Smith said the state’s enforcement action came after members of the organization she and her husband founded, the Kentucky Independent Pharmacists Alliance, filed hundreds of complaints with the state, alleging Caremark was refusing to pay them the actual costs of Medicaid prescriptions they filled.
“This is huge,” she said, adding she hopes it will lead to a fairer system for the state’s independent pharmacists.
In 2016, Kentucky pharmacists supported successful legislation that allows them to file complaints over how pharmacy benefit managers process claims. An investigation of such complaints led to the enforcement action announced Monday, the department said.
This year, independent pharmacists helped push through legislation aimed at forcing pharmacy benefit management companies such as CVS Caremark, to provide more information to managed care companies they serve, who turn must report that to the state. It also empowers the state to set rates paid to pharmacists rather than the outside companies.
Pharmacists and some lawmakers complained the pharmacy benefit companies, as subcontractors to health insurance companies, operated largely in secret with little oversight.
Pharmacy benefit companies have drawn increasing scrutiny in states including Ohio, Arkansas and Kentucky as their growing power to set prices has prompted protests from independent pharmacists who say they lack the power and resources of the large drugstore chains.
Smith said she hopes Monday’s fine leads to closer scrutiny of the industry she said profits at the expense of community drugstores.
“I think this should set a precedent,” she said.
Deborah Yetter: 502-582-4228; email@example.com; Twitter: @d_yetter. Support strong local journalism by subscribing today: courier-journal.com/deborahy.