After months of negotiation, The Department of State Treasurer (DST), along with the State Health Plan (Plan), has reached an untenable impasse with CVS Caremark (Caremark) which refuses to honor its current contract with the State Health Plan. The negotiations with Caremark have been unsuccessful which potentially endangers the financial well-being of the Plan and its members who serve the state of North Carolina every day.
This conclusion comes after many attempts to rectify contractual obligations, including:
Caremark’s failure to provide rebates to the Plan in the amount of tens of millions of dollars since 2023
Caremark’s repeated demands would rewrite the agreed upon contract with the Plan to increase its profits at the direct expense of teachers, state employees, retirees and taxpayers.
The Plan is now evaluating its options to recover money owed and to determine its future relationship with Caremark.
“We have been working hard to address the $500 million deficit the State Health Plan is facing since my first day in office,” said Treasurer Brad Briner. “Part of that work includes partnering with organizations who are committed to working alongside us. We cannot proceed with vendors who will force the Plan to raise premiums on our state employees by not honoring their contractual obligations.”
CVS Caremark has been the pharmacy benefit manager for the Plan since January 1, 2017. The current contract’s term is set to expire on December 31, 2027. The Plan needs Caremark to correct various problems, including paying rebates owed to the Plan. Without these corrections, the Plan would face concerns of insolvency or extreme premium increases for Plan members.
“Our continued hope is that Caremark will honor its contract as written,” said State Health Plan Executive Administrator Thomas Friedman. “My main concern as a fiduciary of the State Health Plan is the impact to the Plan and our members and not the profit Caremark is seeking.”
The State Health Plan provides benefits for over 750,000 state employees, retirees and their dependents. It is the priority of the Plan to provide reliable and affordable medication and services to its members. To that end, members should be confident they will see no adverse effects from these announced actions with no impact to their pharmacy benefit.
“Prescription drug costs are already sky high. State employees and retirees cannot afford to pay more,” said State Employees Association of North Carolina Executive Director Ardis Watkins. “We commend Treasurer Brad Briner and State Health Plan Executive Administrator Thomas Friedman for taking on this fight to bring true transparency to what we’re paying. We stand behind their efforts to hold CVS Caremark to their word.”
The Plan intends to keep members, stakeholders, legislative leaders and the public aware of the efforts moving forward.