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Aetna whistleblower accuses CVS Health's Caremark of fraud in Medicare Part D drug prices

In commercial contracts Caremark kept the spread between the price it negotiated with the pharmacies and what it charged its PBM customers.

Susan Morse, Senior Editor

An unsealed 2014 lawsuit by an Aetna actuary whistleblower against CVS Caremark, the insurer's pharmacy benefit manager, accuses the PBM of billing the government for prescription drugs at a greater price than it pays to pharmacies.

The PBM did not disclose to Aetna how much it was being paid by the pharmacies, nor that it was pocketing the difference, a practice known as spread-pricing, according to the complaint brought by Sarah Behnke against CVS Caremark, Caremark Rx, CaremarkPCS Health and SilverScript Insurance Company.

[Also: Congressman blasts CVS Health, Aetna merger, asks for deeper investigation]

The lawsuit claims that Caremark and its affiliate SilverScripts submitted fraudulent Medicare Part D actual drug costs to CMS since at least 2007.

At the time of the lawsuit Behnke was a senior actuary/head actuary for Medicare Part D for Aetna.

CMS's payments are required to be based on the actual cost of a drug, meaning the drug price received by the pharmacy.

In September, 2012, Caremark notified Aetna of an increase in the maximum allowable price of 229 generic drugs. These drugs represented 59 percent of the utilization by Aetna's Part D beneficiaries. 

On average, the increase was 13 percent for a 30-day supply. 

Behnke did an investigation and discovered that the prices Caremark had been charging, as well as those they proposed to charge, were significantly higher than prices being charged by other Part D plan sponsors to their beneficiaries for the same drugs. For example, Aetna competitors had prices for lisinoprol l 0 mg tablets that ranged from $1.54 to $3.02, but Aetna's price was $4.69, the lawsuit said. 

Aetna determined that its prices were as much as 25- to 40-percent higher than its competitors' prices. 

In 2013, Aetna brought its findings about the drug prices to Caremark and asked if this information could be used to negotiate lower pricing with pharmacies or if Caremark had already negotiated discounts similar to what Aetna's competitors had negotiated, but were not passing them through to Aetna. 

In a virtual admission of liability under the Medicare statute and Part D regulations, the lawsuit said, Caremark responded that it had negotiated lower prices on Aetna's behalf but was not required under the contract to provide these prices to Aetna. 

Any increase in Aetna's discounts would have only been achievable by getting greater discounts from the pharmacies and should not have impacted the Caremark defendant's bottom line since the prices were merely pass-throughs, the lawsuit said. That is, Caremark's profit for the PBM services was covered through administrative fees, not a mark-up on drug prices, the lawsuit said. 

But Caremark is also the PBM for Aetna's commercial line of business.

"This arrangement benefits the Caremark defendants because in commercial contracts, they keep the difference, or the spread between the price Caremark has negotiated with the pharmacy and the price they charge their PBM customers, particularly under lock-in PBM agreements," the lawsuit said.

CVS Health denied any allegations of wrongdoing.

"We believe this complaint is without merit and we intend to vigorously defend ourselves against these allegations," CVS Health said by statement on Tuesday. "CVS Health complies with all applicable laws and CMS regulations related to the Medicare Part D program, and the government filed a notice of declination with regard to this complaint. Also, contrary to these false allegations, CVS Health is committed to helping both patients and payers with solutions to lower their prescription drug costs."

Caremark said it recently announced that drug price growth remained flat for its PBM clients in 2017.

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com

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