Antitrust Concerns Revived As CVS Reveals FTC Probe

By Jacqueline Bell

Law360, New York (November 06, 2009) -- The Federal Trade Commission has launched a probe of CVS Caremark Corp., raising questions about the focus of the investigation given recent complaints from lawmakers, unions and community drugstores that the 2007 merger of the drugstore giant with a pharmacy benefits manager has curbed competition.

In a regulatory filing Thursday with the U.S. Securities and Exchange Commission, CVS said it had been notified of the FTC's investigation into its “business practices” in August 2009, but so far it has declined to elaborate on the nature of the probe other than issuing a statement as part of the SEC filing that the company remains confident that its business practices are in compliance with antitrust laws.

In the SEC filing CVS also said its business practices “are designed to reduce health care costs and expand consumer choice.”

Pressure has been mounting on the FTC to re-examine its antitrust clearance of the $27 billion merger, with concerns being raised about the company putting consumers on a so-called maintenance choice program without their permission, which allows them only to get prescriptions by mail or at CVS pharmacies.

Other protests directed against the policies of the combined company have claimed the company charges lower co-pays to members who fill their prescriptions at CVS pharmacies, misuses information collected by Caremark to find out if customers are using non-CVS pharmacies and then advises them not to, and co-brands its prescription drug card in a way that falsely suggests it can be used only at CVS pharmacies.

In September, eight members of Congress, four Democrats and four Republicans, released a letter they sent to the FTC urging the reopening of an antitrust probe into the 2007 merger citing concerns about competition and consumer privacy.

The lawmakers argued in the letter that the merger of CVS, one of the largest retail pharmacy operators, and Caremark, a giant in pharmacy benefit management, created opportunities for the combined company to enrich itself at the expense of competition and consumers.

Pharmacy benefit managers negotiate with drug companies, health care providers and pharmacies.

“We strongly believe that CVS Caremark is engaging in unfair and deceptive business practices that are causing harm to consumers, patients and local community pharmacies,” the lawmakers' letter said.

On Thursday the National Community Pharmacists Association, which also has urged the FTC to reopen its antitrust investigation of the 2007 merger, commended the FTC for examining the company.

Bruce T. Roberts RPh, the association's CEO, said patients have complained of higher prices, fewer choices and privacy violations and say they face steep penalties for choosing other pharmacies in the wake of the merger.

“In seeking approval for the CVS Caremark merger, company officials said they would be agnostic as to where the consumer fills their prescription. Since then those words have rung hollow for patients and community pharmacists,” Roberts said in a statement Thursday. “Meaningful competition has been severely diminished.”

In September the union Change to Win, which represents workers in CVS Caremark plans, also asked the FTC to open an investigation into CVS business practices, delivering letters to FTC Chairman Jon Leibowitz from health plans and purchasing coalitions expressing concerns about the results of the 2007 merger.

“These front-line payers for health care see the dangers of a pharmacy giant controlling the drug costs and data for their members,” Change to Win chairwoman Anna Berger said in September following a meeting with Leibowitz.

--Additional reporting by Brendan Pierson