NC State Health Plan Considering Legal Action Against CVS Caremark: What You Need to Know

Negotiations between North Carolina’s State Health Plan and CVS Caremark, its pharmacy benefit manager (PBM), have hit a major snag. The plan covers about 750,000 state employees and retirees. The state treasurer, Brad Briner, announced on June 5 that the plan might take legal action against CVS over tens of millions of dollars that the company allegedly owes.

CVS Caremark has been the PBM since 2017, helping negotiate drug prices. However, concerns have arisen that they’re keeping significant savings for themselves. Thomas Friedman, the executive administrator of the State Health Plan, accused CVS of trying to alter their contract to avoid paying what they’re obligated to. CVS claims they are meeting their contractual obligations and saving beneficiaries money.

Legal discussions are ongoing to enforce the current contract, which remains in effect until December 31, 2027. The state’s office believes they may now be past the point of negotiation, as CVS missed a deadline to make progress.

Despite these tensions, Briner emphasized that members won’t experience immediate disruptions in their prescriptions. However, he warned that prolonged litigation could affect premium rates. “If CVS continues down this path, I can’t guarantee that we can keep premiums steady,” he said.

Pharmacy benefit managers like CVS have come under fire for their business practices. Reports indicate that PBMs are often perceived as opaque, raising concerns that they don’t pass along all negotiated discounts to consumers. In fact, the North Carolina Legislature is working on new regulations aimed at increasing transparency in how PBMs operate.

Friedman noted that CVS has a contract requirement to pass 100% of drug savings to the State Health Plan, but he suspects that isn’t happening. Allegations state that CVS is manipulating finances by offsetting losses on some drugs with profits from others.

Adding to the confusion, CVS’s parent company CVH Health is said to have withheld around $135 million in rebates from the state already. The unclear nature of such practices complicates understanding how much financial benefit is actually being provided to the State Health Plan.

For context, the State Health Plan spends about $1 billion annually on medications. CVS claims it has saved the Plan $158 million this year compared to initial projections. Furthermore, the plan recently decided to continue covering high-cost drugs but is also negotiating for continued rebates on these medications.

In a competitive landscape, alternatives to CVS, such as Mark Cuban’s Cost Plus Drug Company, are emerging. They promise transparent drug pricing, although it remains to be seen if they can scale to handle large state contracts like North Carolina’s.

So, while the situation remains fluid, the need for clear and transparent pricing practices in the pharmacy benefit management sector is undeniably vital, especially when public health is at stake.

For more details on PBM operations and ongoing legislative efforts, check out insights from the Federal Trade Commission’s 2024 report.

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CVS Caremark,Federal Trade Commission,GLP-1,insurance,North Carolina State Health Plan,pharmacy benefits management,prescription drugs,State Treasurer Brad Briner