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Giant pharmacy chain CVS leaves NACDS
July 6, 2022 |
A CVS store in Tyler, Texas.

National Association of Chain Drug Stores loses one of largest drug retailers; major CVS unit at odds with other group members

Corporations often aim to diversify through mergers and acquisitions. Associations are most effective when members are in alignment.

That inherent tension manifested last month when CVS Health, one of the largest pharmacy chains in the country with more than 9,900 retail locations, left the National Association of Chain Drug Stores. That represents about a quarter of the 40,000 pharmacies NACDS says are operated by chains. The association has 80 chain member companies, including CVS rival Walgreens, which operates about 9,000 stores.

CVS acquired Caremark—the largest pharmacy benefit management company—in 2007 and health insurer Aetna in 2018. The acquisitions gave CVS a presence in three distinct sectors of the health care industry. PBMs administer prescription drug programs for health insurers and other major organizations. But the advocacy interests of PBMs can diverge from those of pharmacies—and a financial conflict between the two has heated up in recent years.

The battle has played out in statehouses, in federal agencies including the Centers for Medicare and Medicaid Services, and even in the Supreme Court, which upheld an Arkansas law in Rutledge v. Pharmaceutical Care Management Association in 2020. The ruling was a blow to PCMA, which represents PBMs, and a win for states’ authority to regulate the reimbursement rates pharmacies receive from PBMs. NACDS hailed the decision and subsequently filed an amicus brief defending a similar law in North Dakota.

In addition, CVS’ CEO of 10 years, Larry Merlo, retired in 2021. He came from a pharmacy background and was a longtime board member of NACDS. The new CEO of CVS, Karen Lynch, comes from the Aetna division.

CVS’ departure is a blow to NACDS’ revenue and potentially to its advocacy clout, although the group emphasized its financial strength and unity on behalf of pharmacy interests in a July 5 statement.

“For the 89 years since the association was established, NACDS has remained singularly focused and extremely effective on … pharmacy, health and wellness issues,” the statement said. “That has never changed. … NACDS remains duly focused and stands in the strongest financial position in our 89-year history.”

CVS reported paying $1.6 million in dues to NACDS in 2021, a fraction of the association’s overall revenue. According to 2020 IRS documents, the most recent public data available, dues accounted for a third of NACDS revenue of $34 million.

By contrast, CVS—a member of three dozen state and national trade groups—reported paying dues of $4.5 million to PCMA and $2.5 million to AHIP (formerly known as America’s Health Insurance Plans).

CVS released a statement to the media maintaining its commitment to the pharmacy sector. Politico first reported the CVS departure.

“While we have made the decision to step away from (NACDS), we are fully committed to advancing and supporting the value of pharmacy and the critical role that pharmacists play as healthcare providers in their communities,” spokesperson Matt Blanchette said.