CVS In Legal Hot Water
Alleged Scheme to Defraud Pharmacy Consumers
It’s no secret that Big Pharma has been raking Americans over the coals by jacking up drug prices, but how far some will go came as a shock! A lawsuit was filed by Hausfeld Firm one week ago, against CVS Health Corp. Allegedly CVS Pharmacy has been submitting falsified claims to insurance companies with inflated prices since 2008. Kristen Broz, the attorney that filed the lawsuit for the 7 plaintiffs stated, “We’ve seen people who pay $20 for a 30-day supply as their copayments on a drug that was $11.99 for a 90-day supply had they been in CVS’s Health Savings Pass program” (Yahoo Health News). CVS’s Health Savings Pass program offers discounts on generic prescription medications to patients that don’t have insurance or decide not to use it to try and save more money. This program includes popular generic forms of Prozac and Penicillin. “Instead of presenting insurance companies with that discounted price, CVS reported the higher price that a normal retail customer not in the Health Savings Pass would pay” (Yahoo Health News).
On top of the higher payment they were receiving from insurance companies, CVS was also collecting higher copayments from patients for the higher price they were submitting to the insurance. This fraudulent program allowed CVS to increase its market share, fight off discount prices from competitors, and hide its usual prices from third-party payers. It is estimated that hundreds of thousands of people may have been scammed and affected by this scheme. These accusations echo the accusations made by David Morgan, a licensed pharmacist that accused CVS and other Big Pharma companies of pulling this scam in December of 2013. Unfortunately the case was dismissed, but it was alleged that these companies were submitting billions of these false claims as early as 2001 (Courthouse News Service).
AARP Report Posted On Price Inflation for Generics
The price of some generic drugs that have been around for years are starting to climb again even after some relief in 2014. As you know with the Pharmacy Industry being a free market, big brand name Pharma companies can capitalize on their existing patent by driving up drug prices because no other company can provide that medication. Once this patent expires, generic drug manufacturers can then create this medication and sell it for a fraction of the cost. This past May, the AARP Public Policy Institute (PPI) released a report regarding drug prices that showed in 2013 there was a 4% decrease in the cost of generic drugs, which is the slowest rate of decline in the previous seven years.
About 27% of generic drugs listed in the AARP PPI had a rise in drug prices, and the price of 97% of brand name drugs increased. A common generic drug that caused “sticker shock” was Doxycycline Hyclate (100mg, 500 count) that went from $20 to a gut wrenching $1,849 in April 2014 (Trxade currently has it listed for $259.39 wholesale). Even though Doxycycline Hyclate has lowered since last year, it is still over a 1,200% increase from 2013. I spoke with a customer at the Pharmacy last week who said her generic birth control that usually costs $5, is now $35 a month. How did this medication become 7 times more valuable overnight?
That’s a trick question because it didn’t! Even pharmacists are confounded by this change; “When we polled our members about a year ago, they were experiencing a rash of dramatic price increases for generic drugs,” says Kevin Schweers, a senior vice president of the National Community Pharmacists Association, which represents small independent drugstores. “Some of the rises occurred virtually overnight. And it continued to snowball and impact more and more medications” (aarp.org). Generic drug price inflation has been so steep lately, that the Senate Subcommittee on Primary Health and Aging held a hearing to investigate. There is no easy answer as to why generic drug prices have soared to double their original price and in some instances as we have highlighted have even risen to over 1,000%!
Some think it’s due to less competition from mergers, others believe it could be caused by an increase in production cost, but the majority of us know that it is most likely unfounded. Panic is starting ensue for the uninsured as they won’t be able to afford some of the generic medications they have grown accustomed to getting at a fraction of the cost, Medicare recipients will experience higher copays or higher percentages, and all taxpayers should be on alert as we take on the responsibility of paying half of the bill for all prescription drugs through government programs. There’s no easy solution on how to combat this unruly price inflation, but further government regulation, price transparency, additional competition (including China which we covered last week), and a simpler coverage system could help.
Teitelbaum, J., & Wilensky, S. (2nd Ed., 2013). Essentials of Health Policy and Law. Burlington, MA: Jones & Bartlett Learning, LLC.