CVS Caremark and the Blue Cross Blue Shield Association overcharged the Federal Employees Health Benefits Program by a total of $615 million in pharmacy pricing between 2018 and 2021, according to a final audit report published by the Office of Personnel Management’s Office of Inspector General on March 13.
Five things to know:
- The audit looked at whether costs charged to the FEHBP and services provided to its members aligned with OPM’s contract and federal regulations. The auditors reviewed administrative fees, annual accounting statements, claims eligibility and pricing, drug manufacturer rebates, fraud and abuse programs, and performance guarantees for the four-year period.
- The largest finding, which totaled $478.7 million and included lost investment income, centered on CVS Caremark not passing through the discounts it negotiated with two major national pharmacy chains, which were not named in the report. The auditors found that the PBM applied less favorable discounts to FEHBP drug claims than what it had negotiated in its retail pharmacy agreements, primarily for generic drugs, while giving better rates to its commercial clients.
- A second finding of $108.6 million involved transmission fees that Caremark collected from retail pharmacies as offsets against drug payments. The OIG found Caremark reduced its payments to pharmacies by that amount while still billing BCBSA the full drug cost, keeping the difference rather than passing it through to the federal plan.
- The third finding of $27.8 million involved BCBSA paying Caremark a performance incentive when pharmacy costs came in below a pricing guarantee threshold, without first verifying that pass-through transparent pricing requirements had been met. The OIG found that there was no confirmation the FEHBP was receiving the value of Caremark’s negotiated discounts before the incentive was paid.
- BCBSA and Caremark disputed all three findings in the report, arguing the OIG retroactively applied contract standards that were not in effect during the audit period. The OIG rejected that position, saying that the transparency requirements dated back to 2011 and that following contract amendments clarified existing requirements.
“We have cooperated with the OIG throughout the audit but ultimately disagree with the report’s findings,” a spokesperson for BCBSA told Becker’s. “We have provided detailed responses to OIG and will work with the Office of Personnel Management to answer questions they may have, so we can clarify our position.”
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