CVS Caremark reverses course on planned pay cuts to 340B providers

(Updated on Feb. 12)

CVS Caremark wanted to cut its reimbursements to 340B providers and pharmacies. Now it's backpedaling.

In a confidential notice sent Monday to 340B providers and obtained by Modern Healthcare, CVS Caremark said it would not institute a substantial pay cut to 340B pharmacies that was set to start this spring. The pharmacy benefit manager powerhouse's decision not to put payment policy changes in place is a massive win for 340B hospitals.

CVS Caremark first alerted 340B-covered entities to the reimbursement cuts late last year through two key amendments to its payment policy.

In one change, the PBM said it would reserve to the right to "apply unique terms and conditions" to the 340B provider's retail networks, since manufacturers can deny rebates to 340B prescriptions.

The second change would have halted CVS Caremark's standard commercial pharmacy rates from going to pharmacies owned by 340B hospitals or clinics.

In late January, CVS Caremark said it would delay the effective date of the payment changes until April 1. The company also set up a system for pharmacies to disclose whether they are owned by a 340B provider. If they are, they were asked to inform CVS Caremark if they don't "predominantly serve 340B patients."

But on Monday, citing pushback from 340B pharmacies, the PBM said it had decided to scrap the policies altogether.

"Many pharmacies reached out and engaged us in very good conversations," the Feb. 11 notice stated. "We thank those providers that took the time to respond. After consideration of these conversations, CVS Caremark has decided not to move forward with the implementation of the new reimbursement rates scheduled to become effective April 1, 2019."

A spokesperson for CVS Caremark confirmed the company won't be implementing the scheduled reimbursement changes and is currently in the process of notifying the pharmacies that would have seen cuts.

Maureen Testoni, president and CEO of 340B Health—an advocacy group that lobbies for 340B providers—welcomed the announcement.

"Savings from 340B discounts help hospitals, health centers and clinics provide care to patients who often have nowhere else to turn," Testoni said. "This decision is a welcome change and our members appreciate the fact that CVS Caremark listened to their concerns and responded appropriately."

This marks a second big win for 340B hospitals and clinics, after a federal district judge in late December struck down HHS' cuts to Medicare Part B reimbursements for 340B providers.

The litigation is likely to continue, amid a mounting push at the federal level to restrain growth of the drug discount program.

Update: An earlier of the story misstated how 340B drug rebates are denied. This story has been updated to clarify that process.