February 15, 2018

340B Drug Program: The Aetna-CVS Merger Continues the Assault on Hospitals

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With the purchase of Aetna, CVS hopes to steer patients enrolled in Aetna’s insurance plans from hospital outpatient clinics and go directly to clinics located inside the CVS retail outlets.

Regulations impacting hospitals that acquire their drugs through the 340B drug discount program took effect Jan. 1. The program allows certain not-for-profit hospitals to purchase drugs at a reduced price.

Hospitals now face a double hit. Not only are payments for separately payable drugs being slashed, but pharmacies are looking to take emergency and other outpatient services away from hospitals by providing the services in their retail outlets.

Large box pharmacies have dominated the market providing drugs to hospitals enrolled in the 340B drug program. Currently, Walgreens holds almost one-third of the total 340B market, with CVS running a distant second. With high reimbursement rates, it has been a lucrative business for the drug giants. The cuts to the 340B drug program have put a big dent in profits. CVS came up with a solution – and a way to take business from Walgreens.

It is all about taking services from hospitals – there is no need to get profits from just selling drugs after the cuts to the 340B drug program.

CVS and Aetna also recently announced the intention for the pharmacy giant to purchase the insurance company for $69 billion.

It is part of a long-range business strategy to change how healthcare is provided in the United States. CVS would use its massive retail network to provide services to people enrolled in Aetna’s insurance plans.

CVS would like millions of patients going to hospital emergency rooms to get services from CVS clinics; yet this marks a particularly big hit to rural critical access hospitals required to maintain emergency room services. Patients who might have gone to their local hospital will instead go to their 24-hour CVS pharmacy to see doctors and fill their prescriptions. With the purchase of Aetna, they can also steer patients enrolled in Aetna’s insurance plans from hospital outpatient clinics and go directly to clinics located inside the CVS retail outlets.

It would seem that if the merger of CVS and Aetna can move forward, it will be a matter of time before Walgreens moves to purchase an insurance partner. Both Walgreens and Walmart are already eyeing Humana, which is currently playing a spoiler in Walgreens’ recent attempt to purchase Rite-Aid.

It would be sweet revenge for Walgreens to purchase Humana.

Stay safe out there. 

Timothy Powell, CPA CHCP

Timothy Powell is a nationally recognized expert on regulatory matters, including the False Claims Act, Zone Program Integrity Contractor (ZPIC) audits, and U.S. Department of Health and Human Services (HHS) Office of Inspector General (OIG) compliance. He is a member of the RACmonitor editorial board and a national correspondent for Monitor Mondays.

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