Cathedral Pharmacy, across from the stone lions that guard the National Zoo’s gates on Connecticut Avenue, still has the feel of a ’50s drugstore, with an art deco sign and shoulder-height perforated metal shelves.
Independently owned and operated since 1924, the pharmacy is a neighborhood institution in Woodley Park. Its customers include boldface names such as presidential adviser Vernon Jordan and Vicki Kennedy, widow of Sen. Edward M. Kennedy. But mostly they’re regular folks, many of them elderly or on a fixed income and beholden to the pharmacy’s free delivery and what they call its friendly service.
But two weeks ago, many of the loyal customers began receiving letters from CVS Caremark, one of the nation’s largest pharmacy benefit managers, informing them that they would no longer be able to fill prescriptions at Cathedral Pharmacy. The letters directed them to nearby pharmacies, including CVS stores.
Cathedral’s owner of 38 years, Michael Madden, said the business won’t survive without CVS Caremark, which manages prescriptions for many major employers, including the federal government. Madden, 62, said a quarter of his customers are on the prescription program.
CVS Caremark said it is terminating Cathedral’s contract Friday because a recent audit found that the pharmacy was not complying with the terms of their agreement. Madden said an error led to the audit’s findings, but he said it was an honest — and ultimately harmless — mistake. He said CVS Caremark is canceling his contract because the company, which also operates a giant retail pharmacy chain, is trying to drive him out of business.
“It’s the death knell,” said Madden, who sought an injunction against CVS on Tuesday in D.C. Superior Court. “My customers are so hurt — it’s a crime what [CVS is] doing to them, as well as to us.”
In a statement, CVS Caremark Corp. said the company provided Cathedral with “every opportunity” to challenge the findings but that the pharmacy didn’t produce additional information to resolve the problem. CVS Caremark said that it cancels less than 1 percent of the contracts in its network in a year and that terminations are based on concerns over fraud or patient safety, not business interests.
Since CVS and Caremark merged in 2007, consumer advocates and independent pharmacists have raised concerns that CVS could have access to sensitive information from rival pharmacies. The pharmacy benefit management part of CVS Caremark’s business, which processes and pays prescription drug claims, involves collecting customers’ personal data, as well as the drugs prescribed and the pricing.
The company said information obtained through its pharmacy benefit management services is not shared with its retail operations.
But the National Community Pharmacists Association said it has identified examples of CVS Caremark pushing patients toward its retail and mail-order pharmacies by using information from its pharmacy benefit manager.
The association also said CVS Caremark has used audits — conducted regularly to make sure claims and reimbursements are filed accurately — to bully competing pharmacies. CVS denies the association’s claim.
“These audits are focusing a lot of attention on technical violations, the low-hanging fruit, when they should be looking at true fraud,” said John Coster, the association’s senior vice president for government affairs.
The Federal Trade Commission is reviewing CVS Caremark’s competition and consumer protection practices. Similar inquiries are underway in more than 20 states and the District. Spokesmen for the FTC and the D.C. attorney general declined to comment.
CVS Caremark said it is complying with the FTC investigation, and remains “confident that our business practices and service offerings . . . are being conducted in compliance with antitrust laws.”
Bills that would change how pharmacy benefit managers work, including audit practices, have been introduced this year in Congress.
Madden said Cathedral has undergone at least six audits in the past two years. There were a few infractions, he said, but the pharmacy passed all of the audits — except CVS Caremark’s.
CVS Caremark said its audit determined that Cathedral “was unable to verify purchases of certain medications for the treatment of HIV/AIDS from a legitimate drug wholesaler.”
Madden said the problem was 51 bottles of five HIV drugs for which he had filed claims with CVS Caremark but didn’t have invoices. He said the company fined him the value of the drugs, $37,000, and told him in December it would cut him off.
Madden hired a lawyer, and CVS agreed to allow more time for Cathedral to provide additional information.
Madden said the drugs came from the D.C. Department of Health, and he has the documentation to prove it — but not invoices, because the drugs were provided through the AIDS Drug Assistance Program.
The program provides HIV drugs to uninsured or underinsured people. When someone who qualifies for the program gets a prescription from a pharmacy, the Department of Health replenishes the pharmacy’s supply of the drug that was dispensed.
Over the years, Cathedral built up a surplus of these drugs because patients had moved, died or changed their regimen. Madden said he didn’t keep the drugs that came from the Department of Health separate from drugs of the same kind that he bought from a wholesaler. The Department of Health said pharmacies are not required to keep the drugs they replenish apart from the regular inventory.
The drugs are the same, and a pharmacist can’t readily tell from a prescription whether a customer is in the AIDS Drug Assistance Program or has private insurance. So some of the drugs that came from the program — 51 bottles — were apparently used to fill prescriptions for people with CVS Caremark coverage, Madden said.
CVS Caremark — whose contract with Cathedral, submitted with the complaint, states that it may terminate the agreement with or without cause — said it also offered to have an outside firm review the audit’s findings but that Cathedral declined. Madden said he couldn’t afford it.
So CVS said it started telling his customers that the contract would be terminated “to help protect the safety of our plan members and safeguard our payers’ financial interests.”
Bill Phillips, a 66-year-old retired pharmacist, received one of the letters from CVS Caremark. He has been a Cathedral customer since 1976 and said that he relies on the pharmacy’s delivery services because he suffers from multiple sclerosis and doesn’t get around well.
“It’s really a tragedy to see what’s going on,” he said. “I don’t have any idea what I’ll do, but I can tell you, they’ve been very professional and timely — everything you could want from a neighborhood pharmacy.”
Richard Cytowic, a retired neurologist, gets his HIV medication from Cathedral through the AIDS Drug Assistance Program. He has been a Cathedral customer for 30 years, counting on the pharmacy to help him manage his rapidly changing and complicated treatments.
“They know when I’m looking good, they know when I’m looking bad,” he said. “They have alerted me to complications. They have this personal touch.”
While Madden waits for a resolution, he keeps the drugs from the AIDS Drug Assistance Program and the HIV medications he bought from a wholesaler on opposite sides of the storeroom.