CMS Backs Up CVS Network Exclusions Under Part D

Oncology Business News®, October 2016,

In its re-interpretation of CMS policy for Medicare Part D drug dispensing, CVS Health has gone against years of allowing in-house physician dispensaries to participate in Medicare Part D.

Josh Cox, PharmD, BCPS

In its re-interpretation of CMS policy for Medicare Part D drug dispensing, CVS Health has gone against years of allowing in-house physician dispensaries to participate in Medicare Part D. Across the country, many oncology practices are reeling at the news that CVS intends to rule them out-of-network starting in January.

“We would essentially be forced to tell a large fraction of our Medicare Part D patients that they’d have to go to an outside specialty pharmacy,” said Josh Cox, PharmD, BCPS, director of pharmacy services for Dayton Physicians Network in Dayton, Ohio. Cox said as much as 30% of Dayton’s in-house prescription activity would be affected by the CVS change. As a pharmacy benefit manager, CVS functions as a Part D sponsor for the purposes of providing covered Part D drugs at negotiated prices to plan enrollees. However, its willingness to continue contracting with in-house practices for Part D drug dispensing ended this year—not because of a policy change by CMS, the pharmacy company says, but because in-house physician dispensing operations were never intended to be able to participate in Medicare Part D drug distribution, a discovery made through its regulatory review process.

That apparently is the case, based on relevant CMS policy, and oncology practices now are in the difficult position of facing the loss of a substantial portion of their business and their clinical involvement in the Medicare population. The oncology community also has the tough job of having to defend a right to distribute under Medicare Part D that may never have existed.

“CMS Medicare Part D rules define ‘[Part D] sponsor networks’ as pharmacy-only networks,” said Christine Cramer, senior director of communications for CVS, underscoring the legal basis for the out-of-network exclusions. The change in CVS network inclusion will have a vast impact on in-house dispensing, and there is no indication that CMS intends to intervene. The agency has a longstanding policy that Part D formulary drugs must be obtained in-network, with the exception that under unusual circumstances, a drug may be obtained out-of-network when a beneficiary cannot reasonably get to a network pharmacy. What puts a sharper edge on the CMS policy is regulation 42 CFR 423.124(a)(2), which stipulates that, by definition, physician offices not otherwise licensed as pharmacies are always considered out-of-network.

Cramer said CVS checked with CMS before going ahead with this change, and contends that patient access will be unaffected. “We will notify affected plan members well in advance of the January 1, 2017, implementation date in order to provide them with ample time to select a participating pharmacy in our network,” Cramer said.

The Community Oncology Association (COA) alleges that this is little more than a thinly veiled attempt by CVS Health to redirect Part D patients to the company’s own pharmacies. CMS has led the charge for better coordinated, high-value care, COA argues, so why allow drug administration to be removed from the point of care now? “If you look at where healthcare reform is going, it’s certainly about coordinated care, and when you start ripping a part of healthcare (dispensaries) out of the site of care, you’re going to start running into problems,” said Ted Okon, executive director of COA.

CVS owns CVS Caremark, which includes a pharmacy benefit manager and mail service pharmacy, which also meets in-network qualifications for Part D administration under CMS policy. The company also owns CVS Pharmacy, which has 9600 locations.

In-house dispensing of Part D drugs could grow more complicated with patients going to outside pharmacies for their medications, Cox says. In cases where outside pharmacy currently is the only option, there’s already a lot of back-and-forth communication between oncology practices and pharmacies to ensure that authorizations are in place and patients receive the correct medications. This keeps the staff occupied, and it’s not necessarily the most efficient way of getting drugs into the hands of patients who need them, Cox says. Further, access to Part D distribution through CVS helps to subsidize many of the patient management roles that contribute to good care, he adds.

Sending patients to an outside pharmacy “makes it harder to determine when a patient is receiving the medication. That makes it difficult to schedule their treatment, and it leads to delays in treatment. More important, it impacts quality of care and our ability to coordinate patient care, which is our primary concern,” he says.

There is a need for physicians to have in-house control over Part D oral distribution, Cox argues. The mere fact that Part D drugs are oral doesn’t make them easier to manage, or less toxic, he said. “It doesn’t reduce the number of side effects. In fact, it sometimes complicates things because it makes medication adherence infinitely more difficult. It requires a high level of coordination of care and real-time access to the latest patient medical records—so that we can manage patients in a very timely fashion, make rapid dosing adjustments when necessary, and dispense smaller quantities to patients that are having frequent dosage adjustments. This then leads to reduced waste and significant reductions in cost.”

Table: Economics of Specialty Drug Spending

Source: Frier Levitt

CVS is one of the big five pharmacy benefit managers that control virtually all Part D payments, according to COA. Those five also include Express Scripts, Prime Therapeutics, and OptumRx, according to a white paper commissioned by COA and authored by Frier Levitt. The move by CVS to place in-house physician dispensaries out-of-network for purposes of Medicare Part D drug payment would force hundreds of thousands of cancer patients across the country to find alternate sources for their oral oncolytic drugs, according to the paper.

Cox’s Dayton practice has considered becoming a licensed pharmacy so that it could continue to participate under the CVS Caremark program. This would involve hiring a licensed, full-time pharmacist, Cox says, and it would enable the practice to continue dispensing under CVS’s sponsorship status. However, it would not affect the practice’s ability to increase dispensing under other coverage plans. “All of those restrictions would still be in place.” And whereas hiring a pharmacist is a possibility for the Dayton group, smaller practices likely would not be able to afford to do so, Cox says.

“We have built our dispensing programs in our office for patient convenience and to be able to impact medication adherence and clinical outcomes, and it’s unfortunate, to say the least, when we are powerless to affect change in that regard—when an outside entity takes away the freedom of choice for our patients and then renders us powerless or, at the least, puts us in a situation where we’re handicapped in our ability to provide comprehensive care for our patients,” Cox states.

Huge consolidation among pharmacy benefit managers has given the remaining players enormous control over the healthcare market. The influence of these companies is further leveraged by the subsidiary pharmacy benefit plans and pharmacy retail outlets they own.

For the oncology care market, the oncolytics that fall under the Medicare Part D benefit represent a rapidly growing slice of activity at in-house pharmacies. “In 2015, 37% of the total US spending on drugs was attributed to specialty medications, and specialty medications are projected to account for 50% of total drug spend by 2018,” the white paper said. “By 2020, specialty drug spend is projected to total about $400 billion, representing about 9% of national health spending. Moreover, dispensing physicians comprise about 46% of the specialty medical spend.”


Frier Levitt, LLC. Pharmacy benefit managers’ attack on physician dispensing and impact on patient care: case study of CVS Caremark’s efforts to restrict access to cancer care. Published August 2016. Accessed September 1, 2016.