Corporate Consolidation Is Ruining Pharmacies and Hurting Patients

If you spent any time in a pharmacy on July 10 or 11, you may have noticed prescriptions were delayed, and the staff seemed even more stressed than usual.

CVS Caremark, the pharmacy benefit manager (PBM) component of CVS Health, was non-operational for multiple days, meaning when the pharmacy tried to electronically submit a claim to insurance, it did not process. Pharmacy staff were unable to determine whether any prescriptions would be covered, or what patients’ co-pays would be.

If America had a robust, competitive PBM market, perhaps this outage would have not been particularly disruptive. Unfortunately, like many markets these days, instead we have an oligopoly, and Caremark alone processes about one-third of all prescriptions in the country.

The first CVS Pharmacy in Minnesota opened in the fall of 2004, which coincidentally is exactly when I was starting pharmacy school at the University of Minnesota. As a result, I have had a front row seat to witness the effect the now sixth-largest corporation in the country has had on our state.

Earlier in 2004 in other parts of the country, CVS had already acquired rival pharmacy chain Eckerd, which continued a long pattern of CVS buying other pharmacy chains using cheap debt, most notably Revco in 1997.

Minnesota apparently did not have a local chain of pharmacies amenable to purchase by CVS, so the company was forced to expand into the state via organic growth. CVS needed to hire pharmacists to work in their new stores, so I and all my classmates were aggressively recruited as we completed our studies. The personal highlight of my recruitment store tour of the Grand Avenue location in St. Paul was a pharmacy software system that still ran on MS-DOS in 2007.

This time period also represents a clear shift in corporate strategy, as CVS began to pursue vertical integration, acquiring Minneapolis-based MinuteClinic to gain some control over prescribers of medication. But the major paradigm shift came when CVS acquired Caremark, a leading PBM negotiating prescription drug coverage and pricing for millions of insured patients. After the merger, CVS was able to control payments to their pharmacy competitors, and require insured patients covered through Caremark to use pharmacies owned by CVS.

Using this market leverage, CVS spent the intervening years consolidating its power. The most obvious local manifestation of that power was the CVS takeover of Target Pharmacy in 2015. I received so many texts and social media alerts from concerned pharmacists the day it was announced that my phone battery died before I left work. Several of my classmates had previously worked for CVS, and sought a better work environment at Target, only to be re-absorbed.

Working conditions inside CVS Pharmacies — never ideal — have steadily declined to the point of harming workers’ and patients’ health. An entire labor movement called #PizzaIsNotWorking has arisen in protest. Underpayment from Caremark has caused many non-CVS pharmacies to close, creating “pharmacy deserts” in many urban neighborhoods and rural areas. Across Minnesota, there are 32 small towns that had a local pharmacy in 2006, but today have none. Unfortunately this list includes Harmony, my hometown, where my father was the town pharmacist for many years.

Other alleged abuses of power by CVS include contributing to the opioid epidemic, stealing money from state governments, overcharging patients’ insurance companies, abusing federal government programs, and wasting valuable local real estate.

CVS Health has been able to achieve and abuse its power through a series of mergers and acquisitions. Had our existing antitrust laws — such as the Clayton Act — been enforced correctly, this consolidation should never have been allowed.

Unfortunately, beginning in the Reagan administration, legal ideology about corporate mergers significantly changed, oriented around the thought that larger corporations would achieve “efficiencies,” which would lower prices for consumers.

The past 40 years have provided ample evidence of the dangers of unchecked corporate power, however, resulting in a new political movement to restore enforcement of our antitrust laws to their original intent when they were written and passed by Congress. Minnesota’s own Sen. Amy Klobuchar, recently published a great book on the subject.

Two of the movement’s leaders are Lina Khan and Jonathan Kanter, head of the Federal Trade Commission and the Antitrust Division of the Department of Justice, respectively. These agencies have recently proposed to update the official merger guidelines, which if adopted would make mergers and acquisitions that lessen competition — like the many that created CVS Health — less likely.

You can participate in the process.

Click here, and then select “Comment,” to send your own personal message to the FTC and DOJ on how you have been affected by any mergers and acquisitions.

These comments can be informal and are important to help law enforcers understand the issue, and guide their actions to prevent harmful monopolies.