Caremark To Implement New Business Practices Under Settlement With U.S. Attorney
This article was originally published in The Pink Sheet Daily
Executive Summary
The $137.5 mil. settlement requires Caremark to inform client plans of rebates earned as a percentage of the PBM’s total product revenue.
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Caremark's settlement of the Philadelphia U.S. Attorney's investigation of AdvancePCS includes two new business practices that the pharmacy benefit manager must implement, Caremark CEO Mac Crawford said during a Sept. 8 investor call. The two new practices relate to disclosure of manufacturer rebates and payment of drug interchange-related healthcare costs, Crawford said. Caremark held the call to discuss its $137.5 mil. settlement with the Philadelphia federal prosecutor, announced the same day. AdvancePCS' business practices have been under investigation by the Philadelphia U.S. Attorney since 1999. Caremark acquired AdvancePCS in March 2004. Under the settlement, Caremark must provide client plans with quarterly and annual "manufacturer payment reports" that reflect rebates earned by the PBM as a percentage range (within plus or minus 3%) of Caremark's total product revenue. "It's a different disclosure than some other people have agreed to in the industry," Crawford said. The second new business practice highlighted by Crawford is Caremark's agreement to pay drug interchange-related healthcare costs incurred by a plan participant, up to $200. For an amount exceeding that threshold, Caremark can select an independent third party to review the cost and determine whether it qualifies as an interchange-related cost. Medco agreed to pay all out-of-pocket costs for drug interchange-related health care costs incurred by patients as part of its April 2004 settlement with the Philadelphia U.S. Attorney and 20 state attorneys general (1 (Also see "Medco’s New Rules: PBM Will Pay All Out-Of-Pocket Switch Costs, Limit Number Of Changes" - Pink Sheet, 26 Apr, 2004.)). In the Caremark case, the government's investigation focused on AdvancePCS' conduct before its acquisition by Caremark; no allegations of misconduct by Caremark were at issue. The settlement, which includes no admission of wrongdoing, resolves claims under the False Claims Act and Public Contract Anti-Kickback Act. The government alleged that AdvancePCS knowingly solicited and/or received payments from drug manufacturers in return for favorable treatment of their products in the PBM's contracts with the Federal Employee Health Benefits Program and Medicare+Choice organizations. The government also alleged that AdvancePCS "solicited and/or received payments under flat fee lump sum and flat fee percentage rebate contracts with manufacturers for certain heavily utilized drugs as an improper reward for favorable treatment." AdvancePCS also offered and/or paid prospective new customers and customers whose contracts were under renewal consideration to induce them to enter into agreements with the PBM, the government alleged. These payments included cash, stock, implementation fees and credits, according to the government. Like the Medco settlement, the Caremark consent decree contains a variety of provisions aimed at increasing PBM disclosure and transparency - a majority of which Caremark already has adopted, according to Crawford. Caremark must satisfy certain transparency requirements with regard to: client plan relationships; client plan invoicing and audits; retail pharmacy contracting; manufacturer payments; and payments to clients. Transparency requirements also are spelled out for the PBM's relationships with manufacturers, plan participants, retail pharmacies, brokers, a P&T committee, pharmacists and physicians. The consent decree and a corporate integrity agreement must be adhered to for five years. The settlement is not related to ongoing state investigations of the PBM (2 (Also see "Caremark Under Investigation By Washington Attorney General, 18 Other AGs" - Pink Sheet, 2 Jul, 2004.)). - Andrew Shelton |