Understanding Competition in U.S. Prescription Drug Markets: Entry and Supply Chain Dynamics
CVS Caremark and Aetna: We have recently read the news regarding the intention of CVS Caremark to purchase Aetna and have some concerns relating to it. On October 26th of this year, there were some drastic reductions in reimbursements from CVS Caremark leading to many claims being paid under cost. At the time, it seemed like PBMs up to the same old tricks; those being reduction in reimbursements in order to increase company profits and, in the case of CVS, reductions leading to an ever-decreasing profitability for competitor pharmacies, with resultant closures. Coming as this did, about a month prior to an offer for a large-scale acquisition of another insurance provider, it seems likely that some of the money they removed from pharmacies is now being used to purchase Aetna and increase the market power and profitability of CVS. More likely, this was actually the intent of the MAC pricing reductions and all of the funds raised are being used for the acquisition. This is being cloaked with the same spurious assertion insurance companies and PBMs have leveraged so successfully in the past without the need to provide any results, "this will help us reduce healthcare costs". In fact, CVS is taking money from retail pharmacies across the nation to pay for a larger market share for themselves and at once reducing competition's ability to compete. PBM control: PBMs currently operate according to rules that they furnish for themselves and do so in the dark, without the need to answer to anyone. They remain somewhat a mystery to everyone, but likely those who work with them the most know more about their operation than some. It is possible that they have to negotiate on the payer side, but on the pharmacy side there is no negotiation. Pharmacies have no say in drug costs. We cannot effectually demand reimbursement that even covers the cost of the medication we are dispensing, let alone the cost of staff and facilities to dispense it. The little we do make on other medications is subject to confiscation through arbitrary periodic fees (DIR fees). PBMs take patients from local pharmacies, often by forcing them to get prescriptions through their own mail order pharmacies, at times even without consulting the patient. Pharmacies cannot make recommendations to patients regarding insurance plans, so we cannot even be sure we will keep patients if we don't sign contracts. It is becoming increasingly difficult to stay in a market that allows unilateral PBM decisions that control market forces. PBMs are companies, and have and will continue to make decisions that lead to increasing their profits at the expense of the pharmacies and patients who are being left completely at their mercy. In the current atmosphere, the only choice an independent pharmacy has is to accept the contract, lose money and slowly go out of business, or turn down the contract, lose patients and quickly go out of business. Neither of these are good for the patients or areas served by independent pharmacies, which often have no other pharmacies or even healthcare services for miles. It is hard to see how the government can entrust public funds to organizations that function without any oversight. This all can't be fixed overnight, but transparency would go a long way toward a permanent fix. At least we would all know what we are dealing with.