CVS Caremark Criticized by Congress
CVS Caremark Corporation (CVS) is receiving an earful from lawmakers calling for regulatory actions to prevent the company from becoming too large and powerful. Fearing that the company is on the verge of monopolizing the market, independent and small-chain pharmacists are arguing that CVS has been using its status of power in the industry to coerce customers into shopping at CVS pharmacies.
Only two years after the 2007 merger of CVS and Caremark, the company has already neared a value of $100 billion and currently runs more than 7,000 CVS-chain pharmacies around the country.
For those not familiar with the CVS Caremark business model, let me explain further. Caremark serves as a pharmacy benefits manager (PBM) providing discount prices on prescription medications for a regular fee. CVS is a pharmacy chain that receives business from Caremark customers. And business for CVS is going strong; maybe a little too strong.
Opponents have been arguing that a PBM should remain neutral and not favor one particular pharmacy over another, especially when the favored pharmacy is partnered with the PBM in question. Also, opponents are pointing stern fingers at Caremark, saying that the company has been denying service at other pharmacies and even going so far as to directly tell customers to go to CVS pharmacies.
CVS executives have denied the accusations, stating that the incidents in question were isolated events. One spokeswoman pointed out that Caremark works with approximately 64,000 pharmacies, and only 7,000 of those are actually CVS chains.
Whatever the case may be, CVS is now facing the possibility of regulatory actions or even being broken up if lawmakers have their way.
On Tuesday, the Florida attorney general’s office announced that a multi-state task force will pursue an investigation of CVS. Details about the investigation and which states are involved have not been disclosed as of yet, but CVS officials have stated that the company is unaware of a coordinated multi-state inquiry.
To make legal matters even more complicated, CVS is still facing a Federal Trade Commission inquiry that began last August. There is speculation that the FTC inquiry could become ugly after the former Vermont assistant attorney general, Julie Brill, is confirmed as an FTC commissioner. Brill is known for being a staunch activist against big healthcare corporations. In the mid-2000s, she tackled major drug companies and PBMs, including Caremark, in a multi-state inquiry that accused companies of fraudulent practices such as pocketing rebates. The lawsuits won hundreds of millions of dollars, and opened more insight into the world of healthcare corporations.