N.C. State Treasurer Brad Briner says the State Health Plan’s relationship with its pharmacy benefits manager, CVS Caremark, has “reached an untenable impasse.”
Things have deteriorated to the point that the plan’s management is “evaluating its options to recover money owed and to determine its future relationship with Caremark,” according to a Thursday announcement. The State Health Plan provides benefits for over 750,000 state employees, retirees and their dependents
The main point of dispute concerns the drug-price rebates that Caremark obtains from pharmaceutical companies, on behalf of insurers like the State Health Plan and their clients.
The treasurer’s office contends that Caremark hasn’t passed along all the rebates owed to the plan, to the tune of “tens of millions of dollars since 2023.”
Asked to elaborate, Briner says the State Health Plan’s contract with CVS Caremark is unusually favorable to the state and its employees, to the point that Caremark claims it’s losing money on the deal.
The losses got worse, he says, when former Treasurer Dale Folwell and the plan’s board decided last yearto stop covering the cost of GLP-1 drugs like Novo Nordisk’s Wegovy and Ozempic when they’re prescribed for weight loss.
That was aimed at saving the plan money and narrow an impending deficit. But it effectively cut into Caremark’s revenue, and “they’re not happy about it,” Briner says.
“In a normal contract, they could just change what they make on other drugs and they would be no worse off,” he says. “But they can’t do that, so instead of negotiating for a different arrangement, they’ve decided to start withholding rebates.”
For its part, CVS Caremark officials on Thursday said it has “always, and continues to, pass through to the State Plan 100% of rebates it receives on drugs used by its members.”
Like Briner, they indicated the last year’s GLP-1 decision by the plan’s overseers is a key reason for the dispute.
“We do not dispute their right to change their formulary,” Caremark officials said. “But the State Plan is demanding that it continue to receive hundreds of millions of dollars in rebates tied to drugs they chose to exclude when they changed their plan design.”
Plan administrators monitor the inflow of rebates and speak up when they see what they think are shortfalls. In the past, Caremark has chalked this up to “calculation differences,” but the issue keeps recurring, Briner says.
The two sides have tried talking through their differences, but that hasn’t produced an accord.
“We have tried to get to a mutually beneficial place, and every time we offer to give something in exchange for something, they come back and say thank you for giving something, we will give you nothing,” Briner says.
“All the press you read about PBM bad behavior nationally, this is just us living the specifics of that,” he adds.
Good through the end of 2027 thanks to a two-year extension, the contract has a termination clause that the gives State Health Plan, but not Caremark, a way out of the deal, Briner says.
But given the company’s financial claims, “it would be rational for them to quit,” he says.“We have begun the process of trying to find someone else who could do that work for us in the event that Caremark just quits.”
The problem is that there are only three PBMs that are capable of handling the plan’s business. Caremark dominates the business alongside Express Scripts and Optum Rx, which are affiliated with Cigna and UnitedHealth, respectively.
CVS Caremark is an arm of CVS Health, which also controls Aetna, which administers claims for the State Health Plan.
Discord between Caremark and the treasurer’s office is nothing new. Briner’s predecessor, Dale Folwell, complained that the company wasn’t much help in pressing Novo Nordisk and Eli Lilly for concessions on GLP-1 pricing.
On the campaign trail last year, Briner said he wanted to push the state’s PBM contract toward a “cost-plus model” that gives the State Health Plan greater certainty on prescription-servicing prices.
And, like the treasurer’s office, Caremark indicated matters are coming to a head.
“In a show of good faith and partnership throughout this dispute, we have continued to pay the [State Health Plan],” they said. “Continuing to pay this windfall is unsustainable.”
