CVS Health Prescription-Drug Plan Causing Controversy

On the front of its Business Day section, the Wall Street Journal  (10/21, B1, Silverman, Ziobro, Subscription Publication) reports that a CVS Health prescription-drug plan will charge patients up to $15 more for medications from pharmacies selling tobacco products. The city of Philadelphia, with around 5,400 nonunion employees, is the first to enlist in the preferred health network, including between 150 and 200 CVS stores and roughly 100 independent pharmacies. Critics argue the CVS coverage plans provide an advantage to its own pharmacies without reducing costs, prompting calls for the Federal Trade Commission to investigate the decision. While CVS states it will provide a list of qualifying pharmacies, tobacco-free independent pharmacies are still concerned customers will be steered toward CVS for guaranteed savings. The article also outlines a prior FTC investigation of CVS following its merger with Caremark.

 The Wall Street Journal  (10/20, Silverman) broke the story in its “Pharmalot” blog, the majority of which was reincorporated into the full report. The blog pointed out that a CVS spokeswoman did not respond to questions of revenue gain estimates, though an expert expected the move would shift prescriptions from other pharmacies to CVS.

The Chicago Tribune  (10/21, Channick) reports that CVS Health has set a Jan. 1 target date for launching the tobacco-free pharmacy network. Leemore Dafny, professor of strategy at Northwestern University’s Kellogg School of Management, said the measure isn’t necessarily anti-competitive, citing preferred networks for pharmacies as a growing trend.

In its “Wonkblog,” the Washington Post  (10/21, Millman) reports that CVS is still in the process of identifying which pharmacies in its 54,000 store network don’t sell tobacco products.

In Forbes  (10/20, Japsen), contributor Bruce Japsen points out that Caremark’s decision to market the tobacco-free network, which could hurt competitors such as Walgreens and Wal-Mart, came at the request of clients following the CVS decision to stop carrying tobacco products. The network also includes Target stores with pharmacies. The narrow network strategy is described as “becoming more common from insurance companies and pharmacy benefit managers.” CVS Health would not confirm the Wall Street Journal’s “Pharmalot” blog’s reported co-pay of “up to $15.”

Vox  (10/20) contextualizes the development within the bargaining power of Caremark as a pharmacy benefits manager, stating the decision “helps explain why CVS was okay with giving up” its tobacco sales.

Jeffrey R. Ungvary President

Jeffrey R. Ungvary