Originally published on Jun 6, 2017.
Five Rivers has learned that within the past week, CVS Caremark has taken the first steps in initiating chargebacks on claims for diabetic test strips for up to 10 different pharmacies across the US.
CVS CAREMARK’S POLICY IS PARALLEL TO OPTUMRX’S POLICY
CVS Caremark quietly updated their policy in Summer of 2016 to require that pharmacies only purchase diabetic test strips from manufacturers and their authorized distributors. Similar to CVS Caremark’s policy, OptumRX (through VDIP Accreditation) also requires pharmacies to purchase only from manufacturers and authorized distributors.
OptumRX began enforcing their VAWD / VDIP requirement on distributors that sell to OptumRX network pharmacies on October 1, 2016. For a quick point of clarification, VDIP is relevant to diabetic testing supplies whereas VAWD focuses on the distribution of pharmaceuticals.
CVS CAREMARK’S FOCUS ON STRIPS
There is some evidence that CVS Caremark has been focusing on their Diabetic Test Strips payout over the past 6 months. In January, a Senior Investigator/Auditor for CVS Caremark in New York State improperly denied a reimbursement for diabetic test strips, citing that the pharmacy’s vendor for the strips was not licensed in New York State; fortunately, however, that chargeback was reversed after the New York State Board of Pharmacy confirmed that they could not award a license to a company that could not be licensed in their home state.
CVS CAREMARK AND 6 OTHERS SUED FOR COLLUSION ON DIABETIC TEST STRIPS
In an ironic twist, a lawsuit was filed against three PBMs (Caremark, OptumRX and Express Scripts) and four strip manufacturers. It is foreseeable, however, that as the manufacturers continue to raise pricing, the PBMs are being forced to pay more and more towards providing care. If so, the PBM crackdown on strips could be an unfortunate consequence of manufacturers continuing to raise prices without abandon.
INDUSTRY LANDSCAPE
First reported on in 2011, the diabetic test strip “grey market” has exploded over the past decade. Scrupulous individuals buy test strips from the general public that have had their test strips covered by insurance, at either no cost or reduced cost.
However, consumers and these middlemen argue that diabetic test strips have had their prices artificially inflated for years; only because of the shockingly expensive price, does such a lucrative grey market exist. For example, J&J Lifescan sells their 50 count One Touch Blue strips to Medicare for less than $6; however, the same exact strips with a different box is sold retail at up to 1000% more.
Exorbitant pricing scandals have hit the pharmaceutical industry hard over the past few years, but all the screaming has done little to effect change. In addition to State and Federal lobbying, the industry collectively invested in a multi-million dollar marketing campaign earlier this year to justify exorbitant prices.
MOVING FORWARD
Slowly but surely, CVS Caremark and OptumRX are plugging up all the profit centers that independent pharmacies enjoy – if nothing is done, mom & pop pharmacies across the nation will be swallowed up by national drug chains.

About Five Rivers RX

Five Rivers RX is a leading pharmaceutical compliance services firm that uses experience, relationships and knowledge to develop custom solutions for their clients. The company provides numerous services including VAWD Accreditation, state Board licensing and federal registration. Five Rivers helps third-party logistic firms, distributors and manufacturers in the pharmaceutical industry focus on their supply chain while reducing costs, enhancing efficiency and improving quality. Five Rivers is committed to helping their clients thrive and to providing peace of mind.

 

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