CVS Caremark - Prescription Drug Discounts

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A. Using Private Patient Information for Unsolicited Marketing . .... the FDA.17 Emails between Lilly and CVS. Caremark
CVS Caremark: An Alarming Merger, Two Years Later How the CVS-Caremark merger increases health plan costs, creates obstacles to oversight, and threatens patient privacy

An Update on Change to Win’s Report: CVS Caremark: An Alarming Prescription November 2009

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Change to Win is a six million member partnership of unions founded in 2005 to represent workers in the industries and occupations of the 21st century economy. Change to Win is committed to restoring the American Dream for a new generation of workers—wages that can support a family, affordable health care, a secure retirement, and opportunity for the future. www.ChangeToWin.org

Alarmed About CVS Caremark is a Change to Win initiative to

educate health plan managers and trustees as well as consumers about CVS Caremark, now the country’s largest pharmacy benefits manager (PBM) and largest retail pharmacy chain. This report details the troubling patterns exhibited by both CVS and Caremark prior to their merger, and explores the new risks presented by the merged entity CVS Caremark, in such vital areas to health plans and consumers as patient privacy, patient health versus PBM profits, value to plans, conflicts of interest, and quality of service. Change to Win represents workers in CVS Caremark plans that cover more than 10 million people. On behalf of these health plan members, our initiative seeks legislative reform of the PBM industry to protect plan members’ health and privacy. www.AlarmedAboutCVSCaremark.org [email protected]

CVS Caremark: An Alarming Merger, Two Years Later How the CVS-Caremark merger increases health plan costs, creates obstacles to oversight, and threatens patient privacy

An Update on Change to Win’s Report: CVS Caremark: An Alarming Prescription November 2009

Table of Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 I. CVS Caremark’s Business Model Drives Up Costs and Reduces Quality . . . . . . . 2 A. Driving PBM Clients into CVS stores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 B. CVS Drives Up Costs Through Drug Switching . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 C. CVS Caremark Pushes Expensive Medications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 D. Profit-Driven Drug Reclassification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 E. Keeping the Difference: Pricing Disparities that Favor CVS Caremark . . . . . . . . . . 7 F. Audits Raise Concerns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 G. Federal Employee Benefits Program Has the Highest Drug Cost of Any Federal Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 II. CVS Caremark’s Strong Resistance to Transparency . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 A. CVS Caremark Loses Significant Contracts to More Transparent PBMs . . . . . . . . . . 11 B. CVS Caremark Takes Legal Action and Pressures Clients to keep Taxpayer-Funded Contracts From the Public . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 C. CVS Caremark Opposes Legislative Action Supporting Transparency . . . . . . . . . . . . . . 14 III. CVS Caremark’s Unparalleled Access to Patient Data and Potential Threats to Privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 A. Using Private Patient Information for Unsolicited Marketing . . . . . . . . . . . . . . . . . . 15 B. Settlements with the FTC and HHS Office of Civil Rights on Improper Disposal of Medical Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 C. Consent Agreement with State of California on Privacy and Expired Goods . . . . . . 17 IV. Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Endnotes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Introduction THE 2007 MERGER of CVS and Caremark Rx brought together the country’s largest retail pharmacy chain and second-largest pharmacy benefit manager (PBM). After the merger, the company became a healthcare behemoth. CVS Caremark is the nation’s largest purchaser of drugs, fills or manages nearly one in every three prescriptions in the nation, and counts one of every two Americans as a customer.1 The merger provides the combined company unprecedented access to patient and pricing data that it may be using to increase its own profits at the expense of health plan sponsors and patients. In November 2008, Change to Win released CVS Caremark: An Alarming Prescription, How CVS Caremark may be putting patient privacy at risk, putting profits over patient health, and taking advantage of its clients,2 a report that detailed over a decade of questionable and allegedly illegal practices by CVS Caremark and its predecessor companies. The report also outlined the new risks presented by the merged retail drugstore and PBM company in areas vital to health plans and consumers such as as patient privacy, patient health versus PBM profits, value to plans, conflicts of interest, and quality of service. Since the report’s release, clients and consumers have seen firsthand the negative impacts Change to Win predicted of the CVS Caremark merger, often on an even larger scale than expected. Change to Win has also undertaken an ambitious PBM reform initiative, engaging health plans and consumers as well as regulators and legislators in an effort to make the PBM industry more accountable and transparent. As patients, plans, and pharmacists have shared their experiences, more evidence has surfaced that the CVS Caremark merger has negative consequences for healthcare payers and consumers. As the country contemplates healthcare reform, this report seeks to demonstrate that CVS Caremark is quietly using its power as a market leader to squeeze the prescription drug distribution chain for savings while not passing these savings on to plans and patients. The results of this activity may: • Drive up costs for health plans and reduce quality for patients • Reduce transparency and hamper oversight for health plans • Compromise the privacy of health plan participants Fortunately, CVS Caremark’s conduct has caught the attention of Attorneys General and local regulators around the nation. In fact, the Federal Trade Commission (FTC) recently began investigating CVS Caremark after receiving expressions of concern from health plans, independent pharmacists, and consumer groups.3 In addition, five U.S. Senators and over a dozen members of the House of Representatives have asked the FTC to investigate the potential anti-competitive effects of the merged retail-PBM business model and evaluate the potential risks for consumers and health plans when such a large portion of the pharmaceutical supply chain is controlled by one company.

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I. CVS Caremark’s Business Model Drives Up Costs and Reduces Quality CVS Caremark, the combined drugstore-PBM giant, has relationships with over 150 million consumers, one of every two Americans, and has access to data on 30 percent of all prescriptions in the United States. CVS Caremark’s mammoth size and scope give it an unmatched ability to influence consumers, health plans, doctors, and drug manufacturers, and to drive up costs. The combination of a PBM and drug retailer puts together two businesses that have inherent conflicts of interest. As a PBM, CVS Caremark is expected to save health plans money by negotiating lower drug prices with manufacturers and by promoting lowercost drugs to participants, while ensuring that plan participants have access to medicine in a broad pharmacy network. As a retailer, CVS Pharmacy has an incentive to drive plan participants into its stores so it can fill the maximum number of prescriptions, particularly those with high markups, and has little incentive to help save health plans money. Pressuring health plan participants to fill prescriptions at CVS also has the intended consequence of increasing retail sales of other, more profitable items, like soda and candy, which certainly do not serve the interests of healthcare. CVS Caremark employs the most pharmacists and nurse practitioners of any corporation in the nation, yet pharmacists report that they barely have time to counsel patients because they have to meet quotas at the retail store. To make matters worse, CVS Caremark is requiring pharmacists to use some of their scarce time with patients to urge them to consolidate all of their prescriptions at CVS. Pharmacies can act as a check on PBMs, but the merged CVS Caremark seemingly has little interest in limiting its own PBM’s profits. The merger thus creates a model for pharmacy benefits that may decrease health plans’ ability to provide affordable, quality care to their members. In its new incarnation, CVS Caremark is not just focused on influencing consumers—it could be tilting the prescription drug market in its favor behind the scenes. Both the retail and PBM segments of the company may have access to information on their competitors through CVS Pharmacy’s contracts with other PBMs and Caremark’s PBM contracts with other pharmacies – information that would give CVS Caremark an unfair advantage over both its competitors and its clients. Finally, CVS Caremark’s practice of working closely with pharmaceutical manufacturers to promote their blockbuster drugs may be all the more profitable after the merger.

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Now, in addition to collecting the health plan’s payment for an expensive brand-name drug, Caremark may be able to manipulate the reimbursement rate to CVS Pharmacy in order to collect a higher profit. A. Driving PBM Clients into CVS Stores One way CVS Caremark is capitalizing on the merger is by driving Caremark clients into CVS Pharmacies to purchase their prescription drugs as well as the thousands of other products available in the stores. CVS Caremark often uses PBM-related programs to drive plan participants into CVS Pharmacy stores to increase store sales. For example, some PBM contracts have provisions that automatically enroll PBM plan members in a version of CVS Caremark’s loyalty program, ExtraCare, after which they receive an ExtraCare Health card in the mail.4 Highly-touted by the Company as the largest loyalty program in the world with over 50 million members, the ExtraCare card entitles card holders to in-store product discounts on a variety of items from CVS brand over-the-counter medications or laundry detergent to unhealthy soda and snack food.5 CVS Caremark also works to increase CVS Pharmacy sales, by urging Caremark plan members to obtain prescription refills at CVS stores, consolidate all their prescriptions at CVS, and switch from competing pharmacies to CVS.6 As CVS increasingly builds its pharmacy market share by leveraging its PBM relationships, health plans may be less able to negotiate good contracts for their members, and patients’ choices may suffer. B. CVS Drives Up Costs Through Drug Switching As we discussed in our previous report, PBMs have significant power in selecting the medications patients receive because they determine the formulary list of “preferred” drugs for plan members and engage in drug interchange, the practice of switching a patient from a specific drug prescribed by their doctor to another drug that is “preferred” by the PBM.7 While substituting a therapeutically-equivalent generic for a name brand drug is a cost-effective form of drug switching, CVS Caremark and its predecessor companies have been repeatedly accused of favoring drugs and improperly switching patient medications in ways that increase the costs to plans or patients. In 2008, CVS Caremark paid out over $75 million to settle lawsuits that included improper drug switching claims.8 As a result of these lawsuits and others, the company currently operates under several agreements with state and federal agencies that regulate the company’s practices involving rebates from drug manufacturers, management of its formulary and preferred drug lists, contracts with retail pharmacies, and drug interchange programs.9 Despite those high profile settlements, evidence has emerged that CVS Caremark has continued to switch drugs and raise costs. Claim histories demonstrate that CVS Caremark continues to reject claims for some generic medications in favor of more 3

expensive name brand drugs, for which they may receive payments from drug manufacturers. This practice drives up prescription costs for health plans and co-pays for patients. For example, CVS Caremark has recently rejected claims for generic Ocella, a birth control medication. These claim rejections instructed pharmacists to substitute the “preferred drug” Yasmin, which is the higher cost name brand version of the drug.10 In another instance, CVS Caremark rejected a patient’s claim for generic Aderall (Dextroamp-Amphet ER), a medication used to treat Attention Deficit Hyperactivity Disorder, and directed the pharmacist to fill the prescription with the more expensive brand name drug, Adderall XR.13 These recent examples of switching a more expensive brand drug for a prescribed generic belie CVS Caremark’s stated commitment to reducing drug costs and could violate CVS Caremark’s obligations under multiple consent agreements. C. CVS Caremark Pushes Expensive Medications CVS Caremark has also been accused of drug pushing, the practice of promoting specific

brand drugs to patients and/or doctors at the behest of large pharmaceutical producers who compensate CVS Caremark for the promotion. CVS Caremark’s deals with drug manufacturers to promote expensive brand name drugs conflict with its responsibility as a PBM to save its clients money by negotiating lower drug prices with those same pharmaceutical companies. Last year, doctors protested CVS Caremark’s practice of sending them letters with the names of their diabetic patients listed, recommending they prescribe Merck’s new diabetes drug Januvia,14 which is 5 to 10 times more expensive than generic options.15 A recent lawsuit against Eli Lilly revealed that a CVS Caremark subsidiary, AdvancePCS, offered to send 120,000 letters to doctors promoting Eli Lilly’s antipsychotic drug Zyprexa for $5 per letter.16 At the same time Eli Lilly was trying to increase profits by allegedly downplaying Zyprexa’s health risks and marketing it for uses not approved by the FDA.17 Emails between Lilly and CVS Caremark show that officials at the two companies worked together to develop content for the physician letters.18 In October 2009, the Indianapolis Star published an in-depth article depicting CVS Caremark’s continuing collaboration with drug manufacturers to use patients’ private health information for deceptive marketing purposes. Letters mailed to physicians promoting drugs including Lilly’s controversial Cymbalta antidepressant are “designed to look like the informational mailings you often get from pharmacy management firms that tell you things

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about your prescribing patterns as a physician, or about problems with a certain group or class of drugs, so in that sense, it is designed to be deceptive,” according to Dr. Howard Brody, a director for the Institute for the Medical Humanities at the University of Texas in Galveston.19 Dr. Jack Freer, Associate Director of the Center for Clinical Ethics and Humanities in Health Care at the University of Buffalo told the Star, “Benefits companies are using patient information as a commercial pitch to drug companies. Is it an abuse of that relationship? Of course it is.”20

CVS Caremark now has information on 30% of all prescriptions filled in the U.S. and uses the data for purposes like promoting drugs to doctors.

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The conflicts of interest inherent in collaboration between a PBM and a drug manufacturer are exacerbated by the CVS-Caremark combination. After the merger, the company has information on 30 percent of all prescriptions filled in the country and uses the data for purposes like the Zyprexa, Cymbalta and Januvia doctor letters. Lost in the leveraging of CVS Caremark’s unprecedented access to patient data are the financial and health care interests of health plans and patients. D. Profit-Driven Drug Reclassification As we detailed in our previous report, there are many ways in which CVS Caremark may be using its PBM-drugstore model to inflate its profits at the expense of patients, health plans, and competitors. One example of this problem is the company’s apparent efforts to drive its PBM customers to CVS stores to fill their most expensive prescriptions. There is mounting evidence suggesting that CVS Caremark steers the most profitable Caremark prescriptions to CVS pharmacies by including exclusive provider language for “specialty” medications in its PBM contracts and then reclassifying costly drugs as “specialty” medications. Although there is no regulated definition of “specialty medications,” typically they are drugs prescribed for chronic or complex conditions such as cancer, anemia, HIV/AIDS, hepatitis C, multiple sclerosis, growth hormone deficiency, and hemophilia that typically require special dosing or administration (e.g., injectables), special handling (e.g., refrigeration), and/or particularly close monitoring of the patient. Although specialty drugs represent a small number of total prescriptions dispensed, they make up a disproportionate segment of expenditures because each dose can cost thousands of dollars.21 While prescription drug costs have risen sharply across the board, the cost of specialty drugs has been rising far faster. The wholesale price of specialty drugs rose nearly nine percent in 2007, three times the rate of inflation.22 During the same year, the cost of branded drugs rose seven percent and the price of generic drugs fell by ten percent.23 Specialty drugs also make up an increasing share of prescription drug expenditures for health plan sponsors. CVS Caremark reported in its 2008 TrendsRx report that specialty pharmacy spending grew from 9.9% of the company’s book-of-business in 2007 to 13.4% in 2009.24 Given the lack of a regulated definition of specialty drugs, CVS Caremark is able to manipulate its classification of specialty medications to suit its profit-driven motives. It appears as though CVS Caremark uses specialty drugs as one way to increase profits by inserting clauses into its PBM contracts that grant it exclusive provider status for plan members’ specialty medications. This has allowed CVS Caremark to drive its clients’ members’ most profitable prescriptions to its own mail order specialty pharmacies. The contract between CVS Caremark and the Los Angeles Unified School District states, “Caremark shall be the exclusive provider of Specialty Drugs.”25

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Moreover, a pharmacists’ advocate, who is also a pharmacist by training, explains that he and his colleagues initially observed that Caremark referred to refrigerated injectable medications as “specialty” drugs, and required those to be filled exclusively by Caremark – even though every pharmacy in the state is required to have a refrigerator. Then Caremark began classifying high-cost oral oncology drugs like Gleevec, which costs around $3000, as “specialty” medications, even though they do not require any special care or administration. According to this pharmacist, Caremark tends to classify medications costing approximately $500 and higher as specialty drugs, even including oral tablets that do not require any special handling or monitoring by pharmacists or prescribing physicians. For example, Coumadin, a popular blood thinner, costs about $35 per month; however, Caremark does not classify it as a specialty medication, even though patients taking Coumadin have to be monitored on a monthly basis.26

CVS Caremark Leads in Profits Per Prescription Filled CVS Caremark has the highest profit margins in the industry. Over the two fiscal years that the merged company has operated, CVS earned $3.94 in gross profit per prescription filled, amounting to 37% more in profit per prescription than its nearest competitor, Medco Health Solutions Inc., and 57% more in profit than the third largest PBM, Express Scripts.27

E. Keeping the Difference: Pricing Disparities that Favor CVS Caremark PBM critics point to a system known as “spread pricing” as one major example of PBMs retaining profits rather than passing them on to plan sponsors. PBMs often charge health plans more for a prescription claim than they reimburse the pharmacy filling the prescription, with the PBM pocketing the difference. The potential for a PBM to take advantage of spread pricing unbeknownst to the health plan is greatly enhanced when the retail pharmacy and PBM are the same company.28 Some patients have also reported spiking costs when they are required or encouraged to switch to CVS pharmacies. A woman in North Carolina paid $300 more for fertility

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treatments at CVS than she would have if she were paying full retail price at another local pharmacy.29 Non-CVS pharmacists report that CVS Caremark’s new Provider Agreement for network pharmacies prohibits pharmacies from sharing reimbursement information with their patients, making it more difficult for patients to alert their plans to the company’s spread pricing practices. Even more troubling, with this PBM-retailer model, one can imagine a scenario in which CVS Caremark is able to reimburse its own pharmacies at a very low rate for filling Caremark prescriptions, and take a loss at retail while benefiting its PBM business by pocketing a hefty “spread” that is hidden from the plans. That is, because of a lack of transparency in the mechanics of these transactions, it is possible that Caremark could then turn around and charge the plan more for the drug than what CVS was paid to fill the prescription. On the other hand, non-CVS pharmacies may not be able to accept reimbursement rates that are at or below the cost of the drug, leading to fewer pharmacy choices for health plans and consumers. F. Audits Raise Concerns As we detailed in our last report, numerous CVS Caremark clients have accused the company of withholding money that the plans themselves were entitled to or of engaging in deceptive or fraudulent practices that ended up increasing client costs. In 2006, the United States Office of Personnel Management identified over $13 million in overcharges to the Federal Employees Health Benefits Program (FEHBP) by Caremark’s predecessor, AdvancePCS, for the years 2000 through 2005.30 These accusations have continued in 2009, as recent audits completed by several concerned CVS Caremark clients have revealed new evidence of plan overcharging, resulting in clients recovering millions of dollars from the company. • New York Metropolitan Transportation Authority (MTA): A partial audit of CVS Caremark’s contract with the MTA turned up nearly $1 million in overcharges. According to the office of MTA Inspector General Barry Kluger, a “second and independent” probe has been launched and the total amount of overcharges could increase as MTA staff continue to pore over records. The MTA announced in June that it plans to end its relationship with CVS Caremark and expects to save $50 million under a new PBM contract with Innoviant.31 • State of Maryland: According to an audit released in February 2009 by the Maryland Department of Legislative Services, while CVS Caremark managed pharmacy benefits for the state from 2004 to 2007 it collected

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more than $10 million in potential overpayments and undisclosed rebates. In 2007, Maryland replaced CVS Caremark with Catalyst, a smaller, transparencyoriented PBM.32 • First Medical Health Plan, Puerto Rico: In January 2009, First Medical Health Plan, the largest insurer of government employees in Puerto Rico, sued CVS Caremark for breach of contract. An audit conducted for First Medical Health Plan discovered that CVS Caremark had overcharged the plan and withheld rebates. The plan is seeking to recover approximately $34 million.33 Given CVS Caremark’s experience with audits that reveal millions of dollars in overcharges and misclassified rebates, it is no wonder that the company erects barriers to auditing in its contracts and fights clients who seek to audit their contracts with CVS Caremark. For example, in a contract between CVS Caremark and the State of New Hampshire, the company places significant restrictions on plan-initiated audits, stating that the plan “is not entitled to audit agreements with vendors, pharmaceutical companies, participating pharmacies or other providers of products or services to Caremark.” Further, the contract gives Caremark the right to veto a plan’s choice of auditor and bars plans from using auditors who are currently involved in litigation against Caremark, even including any that are providing testimony.34

FTC Called on to Investigate Legality of CVS-Caremark Merger There is growing consensus among health plans, plan participants, and government officials that the CVS Caremark merger, and the new drugstorePBM model for pharmacy benefit services that it represents, threatens access to affordable, high-quality prescription drug services. Because of these concerns, a number of lawmakers and health plans have submitted letters to the Federal Trade Commission asking the agency to investigate whether the merger violates U.S. anti-trust laws and harms both health plan sponsors and American consumers. The merger between one of the country’s biggest PBMs and the country’s largest drugstore chain has created the nation’s largest provider of prescription services and may pose serious risks for consumers and health plans. The merged entity presents potential risks in such vital areas as patient privacy, drug cost to health plans and consumers, and conflicts of interest that result in anti-competitive behavior and may violate American anti-trust laws.

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In a letter to the FTC Chairman in July, Senators Byron Dorgan (D-N.D.), Russ Feingold (D-Wis.) and Amy Klobuchar (D-Minn.), expressed their concern about the CVS Caremark merger, stating that the PBM-retail pharmacy combination “created a heightened opportunity for anticompetitive conduct in the prescription drug market.”35 In a similar letter to the FTC, Senators Mark Pryor (D-Ark.) and Roger Wicker (R-Miss.) urged the FTC to “take appropriate action if CVS Caremark is engaging in any anticompetitive or deceptive practices.”36 More than a dozen members of the House of Representatives have issued similar letters to the FTC calling for an investigation of the impacts of the CVS Caremark merger on American consumers. In a Senate Finance Committee debate on PBM transparency provisions in health care reform, Sen. Maria Cantwell (D-Wash.) also highlighted problems with CVS Caremark: “I would be more than happy if the Judiciary Committee looks into CVS, which is now becoming one of the largest deliverers of drugs in America and that there could possibly be an antitrust issue here if they then end up dominating the market and then passing their own savings on to themselves.”37

G. Federal Employee Benefits Program Has the Highest Drug Cost of Any Federal Plan CVS Caremark manages 80% of pharmacy benefits for health plans within the Federal Employees Health Benefits Program (FEHBP), which covers eight million federal employees, dependents, and retirees, and spends over $10 billion on prescription drugs annually.38 FEHBP carriers’ contracts with CVS Caremark lack basic transparency provisions and appear to be a bad deal for the taxpayers who foot the bill.39 In fact, the FEHBP spends 15 to 45 percent more for prescription drugs than other federal programs40 and the annual FEHBP prescription claim cost per member nearly doubled, from $591 to $1,161 between 1999 and 2007.41 In contrast, the Department of Defense’s TRICARE health plan, covering over five million military personnel and their families, has changed the way it handles drug benefits in recent years, and through these reforms has achieved greater oversight and control of its drug spending along with access to federal drug discounts.42 CVS Caremark manages drug benefits for the Blue Cross Blue Shield Federal Employee Program, which covers more than half of all FEHBP enrollees. This

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plan will increase premiums 15 percent for self-only coverage and 12 percent for family coverage for 2010.43 The Government Accountability Office has cited rising drug costs as one of the primary drivers of increased premiums for FEHBP health plans.44 The House Committee on Oversight and Government Reform’s Subcommittee on Federal Workforce, Postal Service, and the District of Columbia is currently reviewing options for structural reform of the FEHBP drug benefit that would enable the government to lower costs and achieve greater oversight.45 In a hearing held in June, Subcommittee Chairman Rep. Stephen Lynch (D-Mass.) said that “Some research even shows that Costco and Drugstore.com offer better prices for drugs [than the FEHBP]. . . in spite of the fact that the federal program has the buying power of 8 million members. That’s especially troubling.”46 In the same hearing, the Inspector General of the Office of Personnel Management, the federal agency that administers the FEHBP, testified that the current handsoff approach to the drug benefit has created cost structures that are “utterly nontransparent,” a condition that “invites bad pricing and contracting practices.”47

II. CVS Caremark’s Strong Resistance to Transparency In an industry that is starting to respond to criticism that it conducts business in the shadows, CVS Caremark stands out as resistant to transparency. In fact, the company has taken numerous strong measures to prevent greater disclosure of its practices, including allegedly limiting clients’ ability to audit their health plans and vigorously opposing legislative and other measures to increase transparency in the PBM industry. In recent years, CVS Caremark has also lost significant PBM clients to competitors that were awarded the business partially based on providing greater levels of transparency– including revealing manufacturer rebates and discounts and passing those savings on to plans. A. CVS Caremark Loses Significant Contracts to More Transparent PBMs CVS Caremark has suffered nearly $3 billion in contract losses in 2009, including a $1.4 billion contract for the commercial business of health insurance giant Coventry Health Care and the $400 million Chrysler United Autoworkers retirees’ contract.48 Fighting transparent contracting has been a major factor in CVS Caremark’s losses. Several former CVS Caremark clients have cited the company’s lack of commitment to transparent contracting as part their rationale for dropping the company as their prescription drug provider.

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Recent clients that cite transparency concerns as a factor in dropping CVS Caremark include: • New Jersey: In August 2009, the State of New Jersey announced that it would enter into a new contract with Medco Health Solutions to provide pharmacy benefits for approximately 670,000 state employees, dependents, and retirees. CVS Caremark previously managed the $1 billion annual contract with Horizon Blue Cross Blue Shield. The new contract is projected to save the state $559 million over five years through a transparent, pass-through pricing model.49 The state decided on the pass-through option because it “satisfies dual goals of attaining the greatest cost savings while achieving transparency in a time when that keyword is paramount to business operations in the public sector.”50

• New York MTA: In June 2009 New York’s Metropolitan Transportation Authority voted to end its relationship with CVS Caremark and expects to save $50 million under a new PBM contract with Innoviant. The MTA reported that among the reasons it did not consider CVS Caremark for renewal of its $490 million, three-year contract were “exceptions taken to core requirements contained in the RFP.”51 In its Request for Proposals, the MTA placed a priority on transparent pass-through pricing and financial guarantees.52 • Maryland: After being a Caremark customer for over ten years, the State of Maryland replaced CVS Caremark with a smaller, transparency-oriented PBM called Catalyst Rx in 2007 for a $1.1 billion, five-year PBM contract for over 200,000 state employees.53 In rejecting an appeal by CVS Caremark, the state noted that the company’s “commitment [to transparency] seemed vague - [our evaluation] team [was] not comfortable that they will be able to audit.”54 As the company’s contract losses start to add up, investors are beginning to worry about whether the merger is resonating with health plan sponsors. The loss of several large marquee contracts in 2009 prompted CVS Caremark CEO Tom Ryan to admit that “the remaining [2009 PBM contract] opportunities are probably not sizable enough to offset

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the losses . . .”55 And an August 2009 Morgan Stanley analyst report warned that the company’s PBM losses may continue: “Caremark PBM could see another sub-par growth year in 2010 as contract losses will outstrip wins . . .”56 B. CVS Caremark Takes Legal Action and Pressures Clients to Keep Taxpayer-Funded Contracts from the Public Change to Win has sought greater transparency through the disclosure of CVS Caremark contracts with public agencies.57 Obtained through requests under state and federal open records laws, these contracts provide for the prescription drug benefits of federal, state, and municipal employees and are paid for with taxpayer dollars. CVS Caremark has vigorously fought the public disclosure of its contracts and pricing information, even when the prescription benefits are funded from the public coffers. CVS Attempts to Block Change to Win Website In November 2008, days after the launch of the Alarmed About CVS Caremark website (www.AlarmedAboutCVSCaremark.org), CVS Caremark sought a temporary restraining order and injunction against the website to block access to contracts between CVS Caremark and public agencies, contracts that were legally obtained through openrecords requests.58 A district judge in the eastern district of Virginia denied CVS Caremark’s request.59 Pressure on Clients to Withhold Public Contracts While more than three dozen contracts have been released to Change to Win, many federal, state, and local agencies have redacted key contract provisions or refused to release contracts altogether. In several cases, CVS Caremark has directly intervened to ask the public agency to withhold part or all of the contract to keep pricing or other contract provisions from the light of day. For example, through public records requests, Change to Win obtained July 2009 emails between counsel for the Los Angeles Unified School District (LAUSD) and CVS Caremark60 that indicate CVS Caremark requested that the contract be withheld, and agreed to defend and pay for any future litigation accusing LAUSD of breaking public disclosure laws.61 In another incident, both CVS Caremark and the City of Providence, R.I., demanded that Change to Win return a contract that the city had already lawfully released.62 The city subsequently reversed its decision after its legal department conducted a review, prompting the city’s Assistant Solicitor to comment, “we are in agreement with Change to Win that our initial disclosure of the bid was appropriate.”63 Similar interventions by the company have taken place in at least two other locales.64 Lawsuits Over Disclosure in Texas In Texas, CVS Caremark has brought multiple separate suits seeking to block the release of its contracts covering public employees, even after the Office of the Texas Attorney General issued legal opinions in each instance stating that the CVS Caremark contract at issue should be released as a public document under well-established Texas law. 13

In a ruling regarding the release of the CVS Caremark contract for the Houston Independent School District, Texas Assistant Attorney General Reg Hargrove stated, “We note that pricing information pertaining to a particular contract or project is generally not a trade secret . . . Moreover, this office considers the prices charged in government contract awards to be a matter of strong public interest.”65 C. CVS Caremark Opposes Legislative Action Supporting Transparency There is a growing push for PBM transparency at the federal level. In August, the House Energy and Commerce Committee passed a PBM transparency amendment to health care reform bill HB 3200. The amendment, sponsored by Rep. Anthony Weiner (D-N.Y.), created disclosure requirements for any PBM participating in the new health insurance exchanges that were part of several health insurance reform bills.66 Soon after that amendment passed the House Committee, CVS Caremark CEO Tom Ryan told investors that transparency was less important than cost savings, and he predicted the amendment would ultimately fail.67 But in late September the Senate Finance Committee passed a similar amendment sponsored by Sen. Maria Cantwell (D-Wash.), creating disclosure requirements for any PBM participating in the health insurance exchanges and Medicare Part D.68 Contrary to Ryan’s prediction, both amendments passed out of committee and were determined by the Congressional Budget Office to be budget-neutral.

III. CVS Caremark’s Unparalleled Access to Patient Data and Potential Threats to Privacy With the completion of the merger between CVS and Caremark, the Company became the largest provider of prescriptions in the United States, filling or managing over one billion prescriptions annually.69 The combined drugstore-PBM giant has relationships with over 150 million consumers, one of every two Americans, and has access to data on approximately 30 percent of all prescriptions in the United States.70 CVS Caremark’s business model seeks to maximize the value of the private information harvested from PBM plan participants and retail consumers.71 And the company is unabashed about its use of patient data. As CVS Caremark CEO Tom Ryan boasts, “We get the consumer. We have more information on the consumer and their behavior than anybody else, and we share it with our over-the-counter suppliers. We share it with our pharmacy suppliers. So we know how the consumer works.” 72 CVS Caremark has sold consumer information to drug manufacturers and other third parties. These practices are often allowed under its contracts with plans. One typical contract provides that CVS Caremark “may use, disclose, reproduce or adapt

14

information obtained in connection with this Agreement, including Claims as well as eligibility information, in any matter it deems appropriate. . .”73 A. Using Private Patient Information for Unsolicited Marketing Some patients and pharmacists report that since the CVS Caremark merger, the company has used its access to PBM plan members to subject individuals to unsolicited marketing for CVS pharmacies. For example, Caremark beneficiaries who fill prescriptions at non-CVS pharmacies report receiving multiple harassing phone calls from CVS Caremark, encouraging them to switch to CVS mail order pharmacies, even when their health plan permits them to fill at the pharmacy of their choice. One beneficiary reports that CVS Caremark called her several times and when she called the company back, she indicated that she was not interested in switching pharmacies. Soon after, the beneficiary received an ExtraCare Health Card in the mail, offering her discounts at CVS pharmacies. She then received another message left on her home answering machine, with instructions to call CVS Caremark and input a numeric code unique to her. When she did this, she heard the following automated message:

“Hello, this is CVS Caremark, the company that manages the prescription portion of your health benefit plan, calling with important information for [patient’s name]. Is this [patient’s name]? Please say yes or no after the chime. “In times like these, we’re all looking for extra ways to save, which is why we’re inviting you again to try CVS Caremark Mail Service pharmacy. Getting set up is fast and easy, and it’s already offered through your health plan. Would you like to talk with someone to see how much you could save?”74 (emphasis added)

The patient indicated that she wished to speak with someone, and was connected to a customer service representative. When the patient asked why she was receiving so many confusing calls, the representative claimed that her plan had arranged the call to inform her that she could receive her prescriptions by mail order. The customer service representative continued to explain that “if the system shows any prescriptions filled at a local pharmacy, the patient automatically gets a call to let them know that the mail order option is available.”75 This patient reported feeling intimidated by these unsolicited telemarketing calls: “When I get those calls, I want to make sure that I’m doing the right thing. . . I’m afraid I could lose my benefits if I make the wrong decision” about where to fill prescriptions.76 CVS Caremark’s highly touted ExtraCare card is also a way CVS gathers customers’ information – in this case, their past purchase history – for unsolicited marketing.77

15

The ExtraCare website enumerates the benefits of the program but does not state that the company collects information on consumer purchases for marketing purposes.78 CVS Caremark issued 10 million ExtraCare Health cards to individuals enrolled in CVS Caremark prescription benefit plans in 2008, enabling the company to target new patients with specific marketing offers.79 Another CVS Caremark practice — using ExtraCare card promotions to encourage CVS customers to switch their prescriptions to the company — suggests that the company connects prescription information with other consumer purchasing information. For example, CVS Pharmacy customers report being encouraged to use their ExtraCare card when they purchase prescriptions, in exchange for which they receive $1 in ‘Extra Bucks’ for each two prescriptions filled.80 This kind of promotion enables CVS Caremark to collect medical information on people who may not have otherwise filled their prescriptions at a CVS pharmacy and target unsolicited marketing at these individuals through mailings and phone calls to their homes. Not only is CVS Caremark opaque about the use of its customers’ private medical information, it also severely limits the rights of patients who ask the company to keep their information confidential. For concerned patients who may want to keep CVS Caremark from sharing their medical information with third parties or using it for marketing, the opt-out process is a laborious one and may not prevent their information from being used in a way that they object to. Patients who want to prevent their medical information from being used by CVS Caremark must write to the company requesting a specific restriction on the use of their data. CVS Caremark, however, is “not required to agree to those restrictions.”81 B. Settlements with the FTC and HHS Office of Civil Rights on Improper Disposal of Medical Information In February 2009, the Federal Trade Commission and the Department of Health and Human Services announced settlement agreements with CVS Caremark over its failure to properly dispose of personal information from customers and employees at its retail stores. These failures violated both the Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule, which protects the privacy of individually identifiable health information, as well as federal trade law barring unfair and deceptive practices. The agencies alleged that private financial and medical information ended up in unsecured dumpsters, including “pill bottles with patient names, addresses, prescribing physicians’ names, 16

medication and dosages” and “employment applications, including social security numbers; payroll information; and credit card and insurance card information.”82 C. Consent Agreement with State of California on Privacy and Expired Goods In June 2009, the California Attorney General reached an agreement with CVS Caremark requiring the company to make sure expired products are not sold in its stores and that customers’ private information is disposed of properly. The agreement followed an investigation that found CVS regularly sold expired baby food, baby formula, overthe-counter medications and dairy products to consumers and that a number of CVS Pharmacies had improperly discarded more than 500 documents and prescription bottles containing confidential medical information in dumpsters outside of stores. This discarded information included patient names, addresses, birthdates and prescription medications. As part of the settlement, CVS paid nearly $1 million in civil penalties, attorney fees and costs.83

IV. Recommendations Plan trustees, administrators and policy-makers have a responsibility to scrutinize the actions of the nation’s largest purchaser of prescription drugs, a company that aggregates massive amounts of private health information and leverages it to increase its bottom line. Health plans should also remain vigilant about how their drug spend is being managed and whether their PBM’s business model is working for them. A growing number of large plan sponsors are opting for a more transparent Pharmacy Benefit Administrator or Facilitator model to guarantee pass-through of all payments from manufacturers and to secure comprehensive auditing rights. Every plan should take steps to ensure they are getting the pricing guarantees and rebates they have been promised by undertaking the following steps: Carefully Negotiate Key Terms of Your Plan’s PBM Contract Plan trustees should closely oversee their PBM contract from the request for proposals through negotiation, implementation, and monitoring. Plans should pay particular attention to contract terms that could harm the plan and its members, including: • Allowing PBM retention of rebates and other payments from drug companies; • Authorizing the PBM to use and sell the personal information of plan members; • Allowing the PBM to switch drugs without guaranteeing the switch will result in lower costs for the plan; • Limiting the plan’s access to information; • Restricting the plan’s auditing rights.

17

Audit Your PBM’s Performance Health plans have saved or recovered millions of dollars by auditing their PBM’s performance, and plans should consider conducting regular audits to ensure that they are not being taken advantage of. Contract language that allows the plan to conduct independent audits is critical to exercising effective oversight. Support Legislative Reform of PBMs PBMs operate in a weak regulatory environment at both the state and federal levels. Legislative reform is vital to ensuring that CVS Caremark does business honestly and with the best interests of plans and plan members as their top priority. Key initiatives to support include: greater PBM transparency, protection for patient privacy, limiting drug switching to that which results in lower plan costs, and classification of PBMs as fiduciaries to the plans they serve. For more information on Change to Win’s efforts to reform the PBM industry and encourage the Federal Trade Commission to review the CVS Caremark merger, visit our web site, www.AlarmedAboutCVSCaremark.org.

18

Endnotes 1

CVS Caremark Corporation. Slide presentation. The Power of One: 2008 Analyst/Investor Meeting. 21 May 2008 (slides 15 and 34.) Available at: http://library.corporate-ir.net/library/99/995/99533/items/ 294969/2008CVSCaremarkInvestorRelationsALL.pdf; CVS – CVS Caremark Corporation 2008 Analyst/ Investor Meeting Transcript, Statement of Nancy Christal, at p. 7. 21 May 2008. Available through Thomson StreetEvents.

2

Change to Win & Alarmed about CVS Caremark. CVS Caremark: An Alarming Prescription. Nov. 2008. Available at: http://www.alarmedaboutcvscaremark.org/index.php?id=37

3

Providence Business Journal. “FTC competition unit to examine CVS.” 24 Jun. 2009. Available at: http://www.pbn.com/detail/43167.html; Letters to the Federal Trade Commission calling for a review of the CVS Caremark merger from: more than 17 members of Congress; six health plans and purchasing coalitions: (1) Delaware Valley Health Care Coalition, (2) New York Labor Health Care Alliance, (3) Sergeants Benevolent Association, Police Dept, City of New York, (4) 1199 New England, SEIU, (5) Sheet Metal Workers International Union, (6) Laundry, Dry Cleaning and Allied Workers Joint Board of New York, and three consumer groups: (1) the National Legislative Association on Prescription Drug Prices (NLARx), (2) Consumer Federation of America, and (3) US Public Interest Research Group; and the National Community Pharmacists Association.

4

CVS – CVS Caremark Corporation, 2008 Analyst/Investor Meeting Transcript, Statement of Helena Foulkes, at p. 7. 21 May 2008. Available through Thomson StreetEvents.

5

CVS Caremark website: http://info.cvscaremark.com/newsroom/featured-topics/extracare; downloaded 27 Oct. 2009.

6

CVS - CVS Caremark Corproation, 2008 Analyst/Investor Meeting Transcript, statement of Helena Foulkes, at p. 17. 21 May 2008. Available through Thomson StreetEvents.

7

Change to Win & Alarmed about CVS Caremark. CVS Caremark: An Alarming Prescription. November 2008. pp. 9 – 14.

8

Each of the states and D.C. that settled with CVS Caremark filed a complaint and consent order on or around February 14, 2008. These complaints and consent orders are substantially similar. See, e.g., Illinois v. Caremark Rx, L.L.C., No. 08-CH-05634, Circuit Court of Cook County, IL. 14 Feb. 2008 (Complaint for Injunctive and Other Relief); State of Ohio v. Caremark Rx, L.L.C., No. 08CVH02-2251, Court of Common Pleas, Franklin County, OH. 14 Feb 2008 (Complaint for Declaratory Judgment, Injunctive Relief and Costs): at ¶¶ 20-24; United States ex rel. Lisitza v. CVS Caremark. 31 Jan. 2003 (Complaint): at p. 1; see also: Won Tesoriero, Heather, and David Armstrong. “CVS Caremark Reaches Settlement.” Wall Street Journal. 9 Mar. 2008; CVS Caremark Press Release, “CVS Caremark Issues Statement on Settlement Concerning Retail Dispensing Practices for Ranitidine.” 18 Mar. 2008. Available at: http://www.cvscaremark.com/newsroom/ press-releases/cvs-caremark-issues-statement-settlement-concerning-retail-dispensing-practi

9

Corporate Integrity Agreement between the Office of the Inspector General of the Department of Health and Human Services and CVS Caremark Corporation. 2 Sept. 2005 (“Caremark Corporate Integrity Agreement”); United States of America vs. AdvancePCS, Nos. 02-CV-9236 & 03-CV-5425 (E.D. Pa.) 8 Sept. 2005 (Consent Order of Court for Injunctive and Settlement). Caremark agreed to be bound by the Corporate Integrity Agreement to the same extent as Advance PCS.

10

Interview with confidential source who demanded anonymity based on fear of possible retaliation by CVS Caremark.

11

Ibid.

12

Ibid.

13

Ibid.

14

Gonzales, Angela. “CVS Caremark uses patient info to market drugs.” Phoenix Business Journal. 18 Aug. 2008. Available at: http://jacksonville.bizjournals.com/phoenix/stories/2008/08/18/ story14.html

15

Alexander, G.C. Archives of Internal Medicine, Vol. 168. 27 Oct. 2008: pp. 2088-2094. Summary available at: http://www.rxlist.com/script/main/art.asp?articlekey=93738

16

Feeley, Jef, Margaret Cronin and Elizabeth Lopatto. “CVS Unit Played Both Sides, Lilly Drug Lawsuit Shows.” Bloomberg News. 12 June 2009. Available at: http://www.bloomberg.com/apps/ news?pid=20601110&sid=aiewKdPT_wOQ

17

UCFW Local 1776 and Participating Employers Health and Welfare Fund, et. al. v. Eli Lilly and Co., No. 05-cv-4155. The case is pending in the United States District Court for the Eastern District of New York in Brooklyn, New York.

19

18

Feeley, Jef, Margaret Cronin and Elizabeth Lopatto. “CVS Unit Played Both Sides, Lilly Drug Lawsuit Shows.” Bloomberg News. 12 June 2009. Available at: http://www.bloomberg.com/apps/ news?pid=20601110&sid=aiewKdPT_wOQ

19

Russel, John. “Lilly pays CVS Caremark to try to get doctors to prescribe Cymbalta.” Indianapolis Star. 18 Oct. 2009. Available at: http://www.indystar.com/article/20091018/BUSINESS03/910180396/1003/ BUSINESS/Lilly+pays+CVS+Caremark+to+try+to+get+doctors+to+prescribe+Cymbalta

20

Ibid.

21

Stern, Debbie and Debi Reissman. “Specialty Pharmacy Cost Management Strategies of Private Health Care Payers.” Journal of Managed Care Pharmacy, Vol 12, No. 9. Nov./Dec. 2006, at p. 736. Available at: http://www.amcp.org/data/jmcp/736-744.pdf

22

Goldstein, Jacob. “The Most Expensive Drugs are Getting Even More Expensive.” Wall Street Journal. 25 September 2008. Available at: http://blogs.wsj.com/health/2008/09/25/the-most-expensive-drugs-aregetting-even-more-expensive/

23

Ibid.

24

Maas, Angela. “Pharmacy Cost Hikes for Specialty Drugs, While Still High, Are Slowing Somewhat.” Specialty Pharmacy News. 29 Jun. 2009. Available at: http://www.aishealth.com/Bnow/hbd072909.html

25

Prescription Benefit Agreement between Caremark LLC and Los Angeles Unified School District, 1 Jan. 2009, at p. 6.

26

Interview with confidential source who demanded anonymity based on fear of possible retaliation by CVS Caremark.

27

Average of eight quarters of fiscal year 2007 and 2008 EBITDA per Adjusted Claim. 2007 figures source: Adler, Meredith. Lehman Brothers Food & Drug Retailing Analyst Report. CVS Corporation: Change of Earnings Forecast. 1 Aug. 2008, at p. 3. 2008 figures source: Miller, Mark, Walania, Eric and Daniel Hofkin. William Blair & Company Equity Research Analyst Report, CVS Caremark Corporation: Encouraging Developments and Potential Concerns from First-Quarter Results. 6 May 2009, at p. 7.

28

Robert Garis, Bartholomew E. Clark, and Mark Siracuse. “Is the Pharmacy Benefit Manager Truly Transparent? Trust but Verify.” U.S. Pharmacy Review. 2006, at p 1. Available at: http://www.ncpanet.org/pdf/leg/leg_ pbm_transparency_garis.pdf

29

David Balto. Report prepared for National Community Pharmacists Association, “Select Complaints against CVS/Caremark II.” 2009.

30

Unites States Office of Personnel Management, Office of the Inspector General. Final Audit Report: Report on the Audit of AdvancePCS. Office of Audits. Report No. 1H-01-00-04-100. Washington, D.C. 30 Mar. 2006, at p. 4; Unites States Office of Personnel Management, Office of the Inspector General. Final Audit Report: Report on the Audit of AdvancePCS. Office of Audits. Report No. 1H-01-00-06-063. Washington, D.C.. 7 Sep. 2006, at Executive Summary and p. 4.

31

Donohue, Pete. “CVS Reimburses MTA almost $1M after overcharging transit workers, retirees.” New York Daily News. 22 June 2009. Available at: http://www.nydailynews.com/ny_local/2009/06/22/ 2009-06-22_cvs_reimburses_mta.html

32

Office of Legislative Audits, Department of Legislative Services, Maryland General Assembly, Audit Report: Department of Budget and Management, Office of Personnel Services and Benefits. Feb 2009, Executive Summary at p 5. Available at: http://www.ola.state.md.us/reports/Fiscal%20Compliance/OPSB09.pdf

33

First Medical Health Plan v. CaremarkPCS Caribbean, Amended Complaint. Case No. 3:09-cv-01009-GAG, charges at pp. 4-7; monetary damages at p. 11.

34

Local Government Center HealthTrust, New Hampshire. Prescription Benefit Services Agreement with Caremark. 16 Feb. 2007, at p. 14. Also see: Golden Gate Bridge Highway and Transportation District, California. Amended and Restated Prescription Benefit Services Agreement with Caremark. 1 Jul. 2006, at p. 9; Health Action Council of Northeast Ohio, Ohio. Prescription Benefit Services Agreement with Caremark. 1 Jan. 2006, at p. 10.

35

Wolf, Carol. “Senators Urge CVS Caremark Probe in Letters to FTC.” Bloomberg News. 30 July 2009.

36

Ibid.

37

Senator Maria Cantwell speaking during the Senate Finance Committee debate on health care reform, 25 Sept. 2009, at 1:38:36 of C-SPAN video. Available at: http://www.c-span.org/Watch/Media/2009/09/25/ HP/R/23568/Senate+Finance+Cmte+concludes+first+week+of+health+care+debate.aspx

38

Wolf, Carol. “CVS’s Ryan Predicts House Drug-Plan Rules Will Fail.” Bloomberg News. 4 Aug 2009. Available at: http://www.bloomberg.com/apps/news?pid=20601202&sid=aycgc.OnmfJM

39

Welcome Pack for the US House of Representatives Subcommittee on Federal Workforce, Postal Services and District of Columbia Forum. “Prescribing the Right Solution: A Discussion on Improving FEHBP’s Drug Benefit.” At p. 3.

20

40

Ibid.

41

Patrick E. McFarland, Inspector General, U.S. Office of Personnel Management, testimony before the Subcommittee on Federal Workforce, Postal Service, and DC on “FEHBP’s Pharmacy Benefits: Deal or No Deal?” 24 Jun. 2009, at p. 3. Available at: http://federalworkforce.oversight.house.gov/story.asp?ID=2516

42

Rear Admiral Thomas McGinnis, testimony before the Subcommittee on Federal Workforce, Postal Service, and DC on “FEHBP’s Pharmacy Benefits: Deal or No Deal?” 24 June 2009, at p. 3. Available at: http://federalworkforce.oversight.house.gov/story.asp?ID=2516

43

O’Keefe, Ed. “Federal Employee Health Care Costs to Jump 8.8%.” Washington Post. 29 Sept 2009. Available at: http://voices.washingtonpost.com/federal-eye/2009/09/federal_government_employees_e.html

44

Government Accountability Office. “Federal Employees Health Benefit Program, Premium Growth Has Recently Slowed, and Varies Among Participating Plans.” Dec. 2006, at p. 4.

45

House Committee on Oversight and Government Affairs, Subcommittee on Federal Workforce, Postal Service and DC, hearing announcement. “FEHBP’s Prescription Drug Benefits: Deal or No Deal?” 24 June 2009. Available at: http://federalworkforce.oversight.house.gov/story.asp?ID=2492

46

Davidson, Joe. “Complaints Fill Hearing About Federal Employees’ Health Plan.” Washington Post. 25 Jun. 2009. Available at: http://www.washingtonpost.com/wpdyn/content/article/2009/06/24/ AR2009062403511.html

47

Testimony by Patrick E. McFarland, Inspector General, U.S. Office of Personnel Management before the Subcommittee on Federal Workforce, Postal Service, and DC on “FEHBP’s Pharmacy Benefits: Deal or No Deal?” 24 June 2009.

48

CVS Caremark Q2 2009 Earnings Call Transcript, Report of Tom Ryan, ¶ 13. Available at: http://seekingalpha. com/article/153635-cvs-caremark-q2-2009-earnings-call-transcript (last visited October 30, 2009)

49

State of New Jersey, Department of Treasury, Purchasing Bureau. “Award Recommendation, Employee Benefits: Pharmacy Benefit Management, Reference Number: 10-X-20899, T2679.” 4 Aug. 2009. For savings from transparent contract, see pp. 3-4.

50

Ibid. For savings from transparent Medco contract, see p. 46.

51

MTA Staff Summary Report on Contract Number 0819983 with Innoviant, Inc, at p. 2.

52

Ibid.

53

HealthExtras, Inc., press release, “Maryland Board of Public Works Approves Pharmacy Benefit Management Contract.” 4 April 2007. Available at: http://phx.corporate-ir.net/phoenix.zhtml?c=96579&p=irol-newsArticl e&ID=981888&highlight= ; HealthExtras, Inc., press release, “Catalyst Rx Announces Tentative Award of Pharmacy Benefit Contract by the State of Maryland; Five-Year Agreement to Cover More than 200,000 State Beneficiaries.” 21 Mar. 2006. Available at: http://phx.corporate-ir.net/phoenix.zhtml?c=96579&p=irolnewsArticle&ID=834192&highlight=

54

Maryland State Board of Contract Appeals. Opinion by Chairman Burns in the Appeals of Caremark Under DBM Soliciation No. F10R620071. Mar. 2007, at p. 21. Available at: http://www.msbca.state.md.us/ decisions/2007/pdf/caremarkpcs.pdf

55

CVS Caremark Q2 2009 Earnings Call Transcript, Report of Tom Ryan, ¶17. Available at: http://seekingalpha.com/article/153635-cvs-caremark-q2-2009-earnings-call-transcript

56

Morgan Stanley Research, “CVS/Caremark Corp.” 10 Aug. 2009, at ¶ 1.

57

Change to Win, “Compare Contracts,” Accessed 29 Oct. 2009. Available at: http://www.alarmedaboutcvscaremark.org/index.php?id=30

58

Complaint, CVS PHARMACY, INC. et. al. v. Change to Win, 1:08cv1199 (JCC), Eastern District of Virginia.

59

Order of dismissal, CVS PHARMCY, INC. et. al. v. Change to Win, l:08cvll99 (JCC), Eastern District of Pennsylvania.

60

Email correspondence between Gregory McNair, Associate General Counsel, Los Angeles Unified School District, and John F. Zabriskie, Foley & Lardner LLP, counsel for CVS Caremark, 24 Aug.–29 Aug. 2009. Obtained through public records disclosure request.

61

Ibid., dated 27 Jul. 2009.

62

Letter from Melissa Chosnov Tucker, Assistant City Solicitor, City of Providence, to Casey Cabalquinto, Change to Win, 27 Jul. 2009; Letter from Robert H. Griffith, Foley & Lardner LLP, representing CVS Caremark, to Patrick Szymanski, General Counsel, Change to Win, 24 Jul. 2009.

63

Letter from Melissa Chosnov Tucker, Assistant City Solicitor to Patrick Szymanski, General Counsel, Change to Win, 3 Aug 2009; Barbara Polichetti. “Providence gets involved in CVS, labor group fight.” Providence Journal. 4 Aug. 2009. Available at: http://www.projo.com/news/content/CVS_DEMAND_08-04-09_BSF9B8V_v7.38ad13f.html

21

64

Albany: Letter from Robert H. Griffith, Foley & Lardner LLP, representing CVS Caremark, to Thomas G. Clingan, Albany County Legislature and Craig A. Denning, Deputy County Attorney, Albany County, Re: New York Freedom of Information Law, Request No. 07-276 (Change to Win), 25 Oct 2007. [at p. 6 of pdf]; Ohio: Email from Bob Zakrajsek, Senior Director, Membership & Program Development, Health Action Council Ohio to William Margalis, “Responding to FOIA requests of HAC Rx Contract,” 29 Jan. 2009.

65

Letter from Attorney General Greg Abbott, State of Texas to David Galbraith, Assistant General Counsel, Houston Independent School District, Re: OR2008-01618, 5 Feb. 2009, at p. 4. Active dockets for Caremark LLC v. Greg Abbott in Travis County, Texas: D-1-GN-98-002495, D-1-GN-3359, D-1-GN-4270, D-1-GN-4330, D-1-GV-09-000492.

66

Wolf, Carol. “CVS’s Ryan Predicts House Drug-Plan Rules Will Fail.” Bloomberg News. 4 Aug. 2009. Available at: http://www.bloomberg.com/apps/news?pid=20601202&sid=aycgc.OnmfJM

67

CVS Caremark Q2 2009 Earnings Call Transcript, Tom Ryan responding to question from Helene D. Wolk of Sanford C. Bernstein. Available at: http://seekingalpha.com/article/153635-cvs-caremark-q2-2009-earnings-call-transcript

68

Senator Maria Cantwell, press release, “Cantwell Protects Consumers From Paying Artificially High Rx Drug Prices Due To Industry Manipulation.” 25 Sept. 2009. Available at: http://cantwell.senate.gov/news/record.cfm?id=318313

69

CVS Caremark Corporation. Slide presentation. The Power of One: 2008 Analyst/Investor Meeting. 21 May 2008 (slides 14, 21and 34). Available at: http://library.corporate-ir.net/library/99/995/99533/items/294969/ 2008CVSCaremarkInvestorRelationsALL.pdf; Statement of Dave Rickard, CVS Caremark Corporation 2008 Analyst/Investor Meeting. 21 May 2008. Available through Thomson StreetEvents.

70

Ibid.

71

Johnsen, Michael. “Marketing an undeniable difference.” Drug Store News. 10 Oct. 2005, at ¶6-8, available at: http://findarticles.com/p/articles/mi_m3374/is_13_27/ai_n15725245/ ; CVS Caremark Corporation. Slide presentation. The Power of One: 2008 Analyst/Investor Meeting. 21 May 2008. Available at: http://library. corporate-ir.net/library/99/995/99533/items/294969/2008CVSCaremarkInvestorRelationsALL.pdf

72

CVS Caremark Q2 2009 Earnings Call Transcript, Report of Tom Ryan, p. 7. Available at: http://seekingalpha.com/article/153635-cvs-caremark-q2-2009-earnings-call-transcript

73

Prescription Benefit Agreement between Caremark LLC and Los Angeles Unified School District. 1 Jan. 2009, p. 8. See also: Montgomery County Public Schools, Maryland. Prescription Benefit Services Agreement with Caremark. 1 Jan. 2005, at p. 8; Local Government Center HealthTrust, New Hampshire. Prescription Benefit Services Agreement with Caremark. 16 Feb. 2007, at pp. 13-14; Golden Gate Bridge Highway and Transportation District, California. Amended and Restated Prescription Benefit Services Agreement with Caremark, 1 July 2006, at p. 9.

74

Interview with confidential source who demanded anonymity based on fear of possible retaliation by CVS Caremark

75

Ibid.

76

Ibid.

77

Johnsen, Michael. “Marketing an undeniable difference.” Drug Store News. 10 Oct. 2005, at ¶6-8. Available at: http://findarticles.com/p/articles/mi_m3374/is_13_27/ai_n15725245/ ; CVS Caremark, CVS - CVS Caremark Corporation 2008 Analyst/Investor Meeting, statement of Helena Foulkes, at p. 16. 21 May 2008. Available through Thomson StreetEvents.

78

CVS Caremark, “ExtraCare,” accessed 29 Oct. 2009. Available at: https://www.cvs.com/CVSApp/user/extracare/extracare.jsp

79

CVS Caremark, CVS - CVS Caremark Corporation 2008 Analyst/Investor Meeting, statement of Helena Foulkes, at p. 16. 21 May 2008. Available through Thomson StreetEvents.

80

Blank, Christine. “Pharmacies use incentives to attract new customers.” ModernMedicine. 1 Jun. 2009. Available at: http://www.modernmedicine.com/modernmedicine/Chains+&+Business/Pharmacies-useincentives-to-attract-new-customers/ArticleStandard/Article/detail/600924?contextCategoryId=40159

81

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AlarmedAboutCVSCaremark.org [email protected]

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