A small, female-owned specialty pharmacy serving HIV-positive patients in San Francisco wins lawsuit against CVS Caremark, but pharmacy benefits manager refuses to pay, now case is public.
CVS Caremark owes Mission Wellness $3.6 million after an arbitrator ruled in favor of the small pharmacy accusing CVS of breach of contract, the arbitrator ordered CVS to return 100% of the direct and indirect remuneration (DIR) fees recovered from Mission Wellness. DIR fees include any type of compensation received by the Part D Program Promoter (PDP) or its PBM from any source after the point of sale to offset the cost of the PDP. In this case, Silverscript is the program sponsor and the point of sale is for Mission Wellness.
According to the lawsuit, CVS Caremark inaccurately assessed DIR fees agreed in its contract with Mission Wellness. In 2020, CVS recovered 150% of Mission Wellness’s net profit. So while CVS is tied to Mission Wellness’ compensation when it participates in Caremark’s Medicare Part D network, the small dispensary is losing money.
While Medicare Part D is the government’s prescription drug plan for people 65 or older — called SilverScript — people with HIV are eligible for Medicare regardless of age.
In arbitration filings made public this week, Mission argued that it was unreasonable for CVS to pay Mission a negative compensation rate under the terms of the “take it or leave it” contract because it was not a contract they agreed to. The arbitrator agreed, finding that CVS failed to show sufficient calculations to calculate the fees it charged.
“Caremark and SilverScript profit at the expense of Mission Wellness, HIV patients and Medicare,” according to a Tuesday press release from Mission Wellness.
Arbitration between a small minority specialty pharmacy serving HIV patients and a pharmacy giant like CVS is rare. Confidentiality agreements and “gag clauses” prevent the public from gaining a window into cases against pharmacy benefit managers. But the case came to public attention after Mission Wellness filed a lawsuit in Arizona District Court asking a judge to affirm the arbitration award and force CVS to pay the money it owes the pharmacy.
Jonathan Levitt, a representative for Mission Wellness, said his firm, Frier Levitt, has helped clients win several of these awards, which pharmacy giants like CVS or Cigna pay out in arbitration with specialty pharmacies. However, they will never be able to speak publicly about these victories because they are kept secret.
Meanwhile, CVS Caremark said it has recovered DIR fees owed by Mission Wellness because the San Francisco pharmacy did not follow adherence metrics that show how well a drug is working for patients. But Levitt claims Mission Wellness has data to show that they do follow adherence metrics. In particular, since the case involved an HIV drug, and they ran blood tests on it to see if the drug was working, there was no question that Mission Wellness followed compliance metrics, Levitt said.
Levitt said that during the arbitration, CVS Caremark failed to provide compliance metrics for their claims.
CVS Health, which owns CVS Caremark, did not respond to a request for comment.
The case represents a larger controversy surrounding DIR fees, which pose a threat to independent pharmacies. “It’s not unique to Mission Wellness. We’ve eliminated Caremark’s DIR fee entirely,” Levitt said.
Following the Federal Trade Commission’s announcement earlier this month They are investigating the “pharmaceutical middleman industry,“Involving pharmacy benefit managers such as CVS Caremark, Levitt doesn’t expect these victories against PBM to be shrouded in darkness.
“Everyone was afraid to tell the FTC what happened because of the nondisclosure and gag terms, but that’s exactly what the FTC asked for,” Levitt said.
He hopes the win shows specialty pharmacies should be aware that they have rights under federal law, which can be proven in court.
the case is 2:22-cv-00967 in Arizona District Court.
Photo: Justin Sullivan, Getty Images
