Minnesota seeks $1.25 million fine against CVS Caremark over pharmacy rules

Minnesota is threatening a $1.25 million fine against CVS Caremark, alleging it wrongly steered patients to CVS pharmacies owned by its parent company.

Caremark is a Rhode Island-based pharmacy benefit manager that structures how and where health plan enrollees can use their coverage to obtain medications.

The Minnesota Department of Commerce's allegations focus on one of Caremark's programs, called Maintenance Choice, which managed pharmacy choices for about 72,000 state residents using maintenance medicines last year.

Maintenance medications are those used to treat ongoing health problems, such as high cholesterol, asthma, diabetes and heart disease.

After filling their first three maintenance prescriptions, patients were required to use a CVS retail or mail-order pharmacy in which the pharmaceutical benefit manager (PBM) has an ownership interest, the Commerce Department said Thursday in a news release.

In some cases, patients "have needed to drive 20 to 130 miles," the department said, to reach a CVS location rather than refilling medicines a much closer pharmacy.

"A PBM cannot require or incentivize a covered member to use a pharmacy it owns unless certain other conditions are met, such as providing the same incentives at non-owned pharmacies," the news release said, "or imposing the same limits at its owned pharmacies as at its non-owned pharmacies."

Phil Blando, a CVS Health spokesman, on Friday said the company is committed to complying with all laws and regulations that apply to its business as well as clients' health benefit plans.

"While we maintain that federal laws governing ERISA plans preempt state laws and that the plan designs chosen by our Minnesota client plans are lawful, we are working cooperatively with the Minnesota Department of Commerce on this matter," Blando said in a statement.

The Commerce Department has initiated a contested case against the company and is trying to stop practices that the department claims are a violation of the Minnesota Pharmacy Benefit Manager Licensure and Regulation Act. A prehearing conference is scheduled for May 31.

The civil money penalty is the largest the Commerce Department has sought thus far under state regulations for PBMs passed by the Legislature in 2019.

Pharmaceutical benefit managers structure the pharmacy portion of health plan benefits. They create networks of pharmacies where patients can get the best deals on medicines while negotiating prices with manufacturers. They also create "formularies" that specify patient copays for different drugs.

Owned by CVS Health, Caremark is one of the nation's three largest PBMs alongside UnitedHealth Group's Optum Rx and Express Scripts, which is owned by Cigna. Independent pharmacies have argued that PBM rules make it difficult for them to stay in business.

"This case demonstrates the importance of regulating PBMs in order to protect Minnesotans' access to the critically important health care that pharmacies provide," Commerce Commissioner Grace Arnold said in a statement. "The practices uncovered in this case show a corporation placing priority on its own profits rather than serving people."

This story has been updated to include a statement from CVS submitted Friday morning.