CVS Caremark reports lost deals, FTC investigation

In 2007, pharmacy operator CVS merged with pharmacy benefit manager Caremark, a $27 billion deal that seemed poised to change the dynamics of the PBM business. Two years later, however, questions are emerging as to how smart the agreement was.

CVS reported third-quarter profit of 39 percent--to $1.01 billion--with revenue gains at both its PBM business and retail outlets. That being said, it seems to be getting hammered on the sales front, having lost a net $4.8 billion in contracts for the sales season leading up to 2010.

According to analysts, CVS lost some of its business over worries that Caremark might not negotiate aggressively enough with the retail chain side of the house, and that some customers feel that the merger created a conflict of interest. Meanwhile, the two other largest PBMs (Medco Health Solutions and Express Scripts) aren't owned by a retail pharmacy chain.

Furthermore, CVS disclosed this week that the FTC has been examining its business practices since August. The company didn't disclose which practices were at issue, but a Wall Street Journal piece published in May reported that the company had been raising co-payments for some patients who filled prescriptions at pharmacies other than its own.

To get more background on the CVS situation:
- read this Wall Street Journal piece [1] (sub. req.)

Related Articles:
CVS Caremark attacked for allegedly deceptive drug ads [2]
CVS Caremark accused of violating patient privacy  [3]
Express Scripts-CVS battle for Caremark heats up [4]