Understanding Caremark’s Restrictions on Bulk Purchases

1. Allowed for email bulk purchase notifications (and subsequent acknowledgements)
2. Permit pharmacies to notify Caremark up to 21 days after the bulk purchase has occurred
3. Repositioned from a bulk purchase request to a bulk purchase notification (seemingly automatic approval – with Caremark’s acknowledgement)

Despite some concessions, pharmacies are still left wondering how the policy impacts their business, and what they can do about it. Two items to consider:

1. Understand how your drug utilization and inventory turns impact bulk purchasing, and where consideration should be given for bulk purchase notifications.
2. Support advocacy efforts at the state and federal level to fight back against PBM practices. With Rutledge and Wehbi garnering support nationally, states can regulate PBMs successfully.

Understanding Caremark’s Invoice Audits

Caremark invoice audits typically review claims and aggregate purchases over a 12-month period. Upon a pharmacy’s request during the audit, the 30 days prior to the 12-month period will be included for purchase consideration. For example:

                Claims date range = 1/1/2021 – 12/31/2021

                Invoice date range = 12/1/2020 – 12/31/2021 (extra 30 days on the front end)

Of note, all PBMs have similar limits regarding this lookback (or buffer) period which varies from 30 to 90 days. PAAS National^® has experience navigating invoice audits with purchases beyond 90 days prior to the window, but ideally, this should be on an exception basis.

Some PBMs (e.g., OptumRx) may ask for a full dispensing history report from the pharmacy to reconcile the purchases against, creating a much greater hurdle for pharmacies to jump successfully. Caremark invoice audits generally focus on Caremark claims, meaning you don’t have to prove purchases for all claims in the 12-month period, just purchases for Caremark claims.

Consider the following audit scenarios:

Audit Example 1: Pharmacy purchases exactly what they dispensed throughout claims/invoice date range

Audit Example 2: Pharmacy bulk purchased a 6-month supply prior to the invoice date range

Audit Example 3: Pharmacy bulk purchased a 6-month supply prior to the invoice date range and Caremark represents 60% of all claims dispensed.

The percent of your claims billed to Caremark will vary compared to peers, and more importantly, every medication will have a unique percentage that is billed to Caremark. If Caremark prefers Ventolin^® over ProAir^® and Proventil^®, then your percent of Ventolin^® claims for Caremark will be proportionately greater.

It’s great to understand the situation, but who has time to calculate this for the thousands of NDCs on a pharmacy shelf? No one. So, pharmacies are going to need to make a concerted effort to think about what purchases might exceed a reasonable threshold for their pharmacy, as a percent of Caremark claims.

Frequently Asked Questions:

Does this mean that my pharmacy cannot make bulk purchases?

No. Remember that Caremark (and most other PBM) invoice audits look at aggregate purchases over a specific time period that often exceeds 12 months. Congruently, PBMs are typically comparing your total purchases against claims billed to that specific PBM. Depending on the specified date range of a future PBM invoice audit, this may be a non-issue.

There are scenarios where you are at higher risk:

• Products with low turnover/few turns
• Products where Caremark is the only PBM that covers the drug and represents a high percentage of total utilization at your pharmacy
• Situations where you have only one patient taking a particular medication and they stop for various reasons (discontinued, no longer customer) and you are stuck with open inventory on the shelf

This is a unique business decision for every pharmacy. If the bulk purchase is likely to create an invoice shortage for Caremark, we would encourage pharmacies to file for a bulk purchase notification .

Do I need to purchase inventory every 30 days to remain compliant with Caremark’s policy?

No, and Caremark has removed the original reference that created confusion (strikethrough text below has been removed)

Caremark will not accept purchases occurring outside of thirty (30) days prior to the selected date range unless: (1) Provider notifies Caremark in writing of its intent to make a bulk purchase (i.e., more than thirty (30) days of inventory) of a Covered Item…

What purchases are likely to be an issue?

If the original purchase is outside the invoice date range, it will represent a problem unless you are purchasing enough product during the date range to support Caremark claims. Note, some PBMs reconcile to the 11-digit NDC level.

• Consider an invoice audit for the calendar year 2021. You purchase NDC A prior to the invoice audit date range on 11/30/2020 and use NDC A to dispense for the next 4 months (12/1/2020 – 3/31/2021). The wholesaler subsequently switches the preferred generic, so your future purchases (during the audit window) are for a different product, NDC B.
• You have a patient on Biktarvy^® who passes away. You have a quantity remaining on your shelf that cannot be returned to the wholesaler and you’re unable to move the inventory. A year later a new patient starts on Biktarvy^® and you use the remaining stock on hand.

These scenarios will likely need to be challenged by a pharmacy in arbitration to get Caremark to relent.

Is this legal?

At a minimum, the requirement is anticompetitive and deserves to be challenged. This type of conduct further supports the Federal Trade Commission investigating the monopolistic practices of PBMs and vertical integration. Surely no CVS Pharmacy is submitting bulk purchase notifications and yet they have dead inventory that would create an issue if Caremark were to audit their pharmacies.

Have pharmacies really been terminated as a result of bulk purchases?

Unexplained invoice audit shortages are serious business and PBMs are quick to conclude that pharmacies are engaged in fraud if the pharmacy cannot provide good reasons for (and solutions to resolve) the shortages.

There are many reasons for invoice shortages other than fraud and include things like: auditor math errors, wholesaler failed to respond, issues with units of measure, wrong NDC billed, wrong quantity billed, wrong time frame, claim not reversed successfully, and more.

While most invoice audits do NOT result in contract termination, any unsupported claims are subject to recoupment. The challenge with invoice audit shortages is trying to find the “root cause(s)” of individual drug shortages so that pharmacies can implement the right corrective actions to prevent a recurrence. This takes some internal investigating and PAAS has extensive experience guiding pharmacies if you are ever in this situation.

What should we do today?

There is no one-size-fits-all answer for every pharmacy. The bottom line is that there is audit risk when making bulk purchases as ALL PBMs have limited lookback periods as explained above. It is important to understand that PBMs look at aggregate purchases over an extended window and that the lookback periods are relative to a yet to be defined audit date range.

Short-term considerations

• Notify Caremark of your intent, or execution, of a bulk purchase no later than 21 days after the purchase at: pharmacyaudit@cvshealth.com

• • Caremark will acknowledge receipt of the notice – retain this for your records!
• Re-evaluate pros and cons of existing pharmacy buying habits
  • Is the larger pack size less expensive, or just more convenient?
• Re-evaluate how you handle stale inventory to reduce risk (return to wholesaler, reverse distributor, pharmacy-to-pharmacy sale in accordance with Drug Supply Chain Security Act 3T exemption)
• See February 2022 Newsline article Caremark^® expands “Aberrant” Language and Restricts Bulk Purchases.

Long-term considerations

• Engage PAAS when you are involved in a PBM invoice audit
• Continue advocacy through state and national pharmacy associations to shine a light on unfair PBM practices that make it harder to take care of your patients and remain in business