Hopkinton pharmacy takes on CVS Caremark
Independent pharmacy Hopkinton Drug is taking CVS Caremark to task in court, after the pharmacy benefits manager moved to end a contract that could devastate the Main Street business.
On June 30, attorneys for Hopkinton Drug filed a lawsuit in U.S. District Court in Boston, seeking an injunction and damages after Rhode Island-based CVS Caremark notified Hopkinton Drug it was ending a nearly-20-year provider agreement that allows patients with prescription coverage by CVS Caremark to fill prescriptions at Hopkinton Drug.
Lawsuit raises questions about CVS Caremark's intent
Hopkinton Drug has asked a judge to issue an injunction that would bar CVS from ending the agreement, claiming Hopkinton Drug will be “immediately and irreparably harmed” unless the court takes action. According to the lawsuit, about 28 percent of Hopkinton Drug’s revenue comes from clients insured by health plans managed by CVS Caremark . If the agreement is terminated, the pharmacy will have to lay off between 40 and 50 percent of its staff of 48, the lawsuit said.
Founded in 1954, Hopkinton Drug is the only pharmacy in Hopkinton, and specializes in compounded pharmaceuticals for patients who cannot take standard medications due to medical conditions or sensitivities, according to the lawsuit. The pharmacy has a particular focus on treating Lyme Disease and mold allergies, and Katz is an active member of several industry associations.
The lawsuit claims that CVS audited Hopkinton Drug in April 2013 and raised concerns about the sale of prescriptions in states where it’s unlicensed. Hopkinton Drug said it immediately ceased that practice as it applied for the requisite licenses, and now employs authorized couriers to transport prescriptions, which the pharmacy said is “fully permissible under relevant laws.” After correcting those actions, Hopkinton Drug said CVS didn’t raise additional issues before it notified Hopkinton Drug in June that the provider agreement was being terminated.
Carolyn Castel, vice president of corporate communications at CVS Caremark, addressed the lawsuit in an e-mail statement, confirming that the agreement with Hopkinton Drug was terminated July 3, after a judge denied a request for a temporary restraining order to prevent the termination. Castel said as a pharmacy benefits manager, CVS Caremark is required to audit the pharmacies it works with.
“Network termination decisions are not made lightly. In fact,(CVS Caremark) terminates less than one percent of its network pharmacies in a year. We pride ourselves on maintaining the highest standards for safety and quality for pharmacies in the network and a necessary component of this is ensuring that pharmacies are complying with the terms of its provider agreements,” Castel wrote.
Dennis Katz, president and lead pharmacist at Hopkinton Drug, referred comment to his attorneys, but they did not return phone calls seeking comment.
2007 merger prompts speculation
CVS Corp. and Caremark RX, Inc. merged in 2007, creating what an “integrated pharmacy services provider,” with CVS Caremark acting as a prescription benefits managers for health insurance subscribers, in addition to CVS’s retail side of the business.
In a statement released at the time of the merger, CVS said the deal “unifies the nation's largest pharmacy chain with a leading pharmaceutical services company, creating the opportunity to deliver unique products and services that will help manage costs for employers and improve access and choice for consumers.”
While the Federal Trade Commission (FTC) has investigated complaints that the merger has led CVS Caremark to steer business to CVS pharmacies after an initial review in 2007, that case was closed in 2012. The FTC dismissed charges that the merger resulted in anticompetitive behavior.
Image source: Freedigitalphotos.net
CVS Caremark made inquiries to buy Hopkinton Drug
Hopkinton Drug’s lawsuit raises questions about whether CVS Caremark may have an unfair advantage over smaller pharmacy businesses.
The lawsuit claims that the real estate division of CVS has inquired several times about whether Katz, who also owns Hopkinton Drug, would be interested in selling the business and its real estate assets, which suggests that the clientele served by the independent pharmacy is on CVS Caremark’s radar.
But Castel said the suggestion that CVS Caremark terminated its agreement with Hopkinton Drug for any reason other than issues found during the 2013 audit are unfounded.
Hopkinton Drug is not alone. Brian Bouvier, chief operating officer at Bouvier Pharmacy & Home Medical Solutions in Marlborough, said CVS Caremark frequently inquires about purchasing his business, too. But with no plans to sell, Bouvier continues to work with CVS Caremark under a provider agreement similar to the one Hopkinton Drug hopes to maintain. Without it, Bouvier said his business would flounder.
“Honestly, if they canceled my contract tomorrow, it would put me out of business,” Bouvier said. “You can’t be in business in pharmacy and not have a contract with them.”
Still, Bouvier said the merger between CVS and Caremark created a relationship that is too “cozy” for the good of the public and competing pharmacies. Bouvier said that, at the very least, a higher level of oversight is needed to ensure business practices are fair.
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