Raising Co-Pays at Cigarette Sellers Boosts CVS Bottom Line

October 29, 2014

Should CVS Caremark be allowed to charge patients more for buying their prescriptions at stores that sell tobacco?

When drugstore giant CVS Health decided to discontinue the sale of cigarettes across its pharmacies, many folks in the health care community applauded the company's noble move. In spite of the loss of millions of dollars in sales, CVS pulled the plug on this line of income in an effort simply to position its stores as “healthier” places to shop.

Or so we thought.

As it turns out, there appears to have been an ulterior motive that would effectively recoup the sales losses on the cancer-causing tobacco products by coordinating a strategy with the pharmacy benefit manager (PBM) branch of the corporation, CVS Caremark. In a move that seems suspiciously self-serving, CVS will begin to offer plans that raise co-pays for patients who shop at stores that still sell cigarettes.

Effectively, CVS will be driving patients away from competitors like Walgreens, Rite Aid, and Walmart into stores like CVS or Target that no longer sell tobacco. Adam Fein of Pembroke Consulting agrees, as he was quoted in the Wall Street Journal stating, “CVS retail drugstore business will certainly benefit, because prescription volume will shift into CVS retail pharmacies from other drugstore chains.”

What first appeared to be utterly magnanimous now looks more like a strategy in disguise. Or, as the late radio broadcaster, Paul Harvey, was fond of saying: “Now you know the rest of the story.”

Moves like this expose, in my opinion, the conflict of interest that exists when companies like CVS Health own both the pharmacy chain and the PBM network. Add that to the fact that CVS also operates its own specialty pharmacy business, and the result is the proverbial triple threat in health care management.

We might compare this to building your own rainbow, leading patients to your very own pot of gold. Except, in this case, CVS gets to keep all the gold - lucky for them, not so lucky for patients.

But what is so wrong with directing patients into pharmacies that don’t sell tobacco? Don’t we want a healthier society? Don’t we want to discourage smoking?

Here’s the problem: this move fails to address the real problem of smoking-related health conditions.

Think about it: A smoker enrolled in this new benefit will end up paying less money for their prescriptions by going to CVS than a non-smoker will pay at Walgreens.

I’m sorry, but that’s absurd.

Health plans have a vested interest in keeping costs under control, and they have a variety of mechanisms in place to do so. They use co-pay strategies to encourage the use of lower-cost (and equally effective) generics in place of more expensive brands. They implement prior authorization processes to ensure the more expensive prescription options are reserved for those who have failed treatments with less costly therapy choices. They even negotiate rebates with brand manufacturers and give preferential formulary status to such companies to help offset their spending.

But raising copays on patients merely because they choose to SHOP somewhere that sells tobacco doesn’t address their health status at all. It’s all about driving traffic to their stores and, in my opinion, deceptively charging patients more for going elsewhere.

It is one thing to limit your network; health plans do that all the time. By working with only select pharmacy networks, they create a market favorable to lower reimbursements in exchange for higher volume. This is just basic health care economics 101.

But charging patients more for using one network location, rather than another, is arguably a horse of a different color. Co-pay structure is confusing enough as it is. It is likely that many patients enrolled in these plans will unknowingly be paying higher copays, thinking that all network pharmacies charge the same price. As a practicing retail pharmacist, I think the last thing we need is to inject more confusion into a system that is already hard enough to navigate as it is.

I’m sorry ,CVS Health, but this move is less about the health of patients, and more about the health of your bottom line.