Caremark RX Essay ⋆ Business Essay Examples ⋆ EssayEmpire

Caremark Pharmacy Services, a subsidiary of CVS Caremark Corporation, is a Nashville-based pharmacy benefit management (PBM) company.

Caremark was the name of a unit of Baxter International (established 1931), a global healthcare company headquartered in Illinois. Baxter’s Caremark division (originally an independent company called Home Health Care of America) handled its PBM, the third-party administration of medical prescriptions. Doing business as a Pharmacy Benefit Manager entails processing and paying out prescription claims filed by pharmacies, negotiating with pharmaceutical manufacturers, and acting as the middleman between pharmacies and pharmaceutical companies. This often extends to the PBM being responsible for establishing the formulary: the list of medical prescriptions that will be covered by a given benefits plan (with drugs not on the formulary costing the consumer more). Formularies typically encompass all classes of pharmaceuticals but may not include all brands. While consumers see those elisions in terms of the effect on themselves, from a business perspective there is an important effect on the pharmaceutical company: if a PBM includes Drug X but not Drug Y in its formulary, Drug Y is likely to lose business among the customers affected by the PBM’s formulary.

Because of this and the bulk purchases that result from working with a large number of pharmacies, PBMs are able to negotiate lower prices, which can translate into additional services for the customer. As a division of Baxter, Caremark pioneered this style of Pharmacy Benefit Management by offering a mail order pharmacy service in 1985, years before online pharmacies would become a going concern. In the same year, Caremark began offering home care services. In 1991, Caremark acquired what was then the largest PBM in the United States, Prescription Health Services. Baxter spun Caremark off the following year, as a separate publicly held company.

In 1996 Caremark was acquired by MedPartners, a separate company founded by the HealthSouth Corporation. MedPartners went into receivership shortly thereafter, because of difficulties it had managing other operations. By the end of the 1990s it streamlined the company, divested itself of all nonPBM concerns, and renamed the company Caremark Rx. In 2004 Caremark Rx merged with another PBM company, AdvancePCS, retaining key members of management and aspects of its business practices. In 2007 it merged with CVS to form CVS Caremark Corporation.

Caremark Pharmacy Services now operates as one division of CVS Caremark Corporation, managing its PBM operations; the other division is CVS/pharmacy. As a result, Caremark now has an established relationship with the pharmacies with which it does business, further bolstering its bargaining position with pharmaceutical companies. It has become one of the leading PBM companies, working with over 2,000 health plans.

Bibliography:

Milt Freudenheim, “Caremark, A Spinoff By Baxter,” The New York Times (June 13, 1992);
Jan Crawford Greenburg, “Healthy Penalties in Caremark Fraud Case,” Chicago Tribune (June 17, 1995).

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