CVS, an American health company has filed a lawsuit against John Lavin, a former senior vice president in charge of CVS Caremark’s retail pharmacy network. The lawsuit was filed to avoid John Lavin to take a job at Pill Pack, an Amazon pharmacy subsidiary. This week judge has ruled in favor of CVS and that avoided the immediate employment of John at PillPack.
This case is followed by another case, filed by United Health that sued one of its employees to join the Amazon initiative. The venture was Haven, an Amazon’s joint venture initiative with Berkshire Hathway and JP Morgan. In 2017, Amazon announced that it will enter into the health market. In regards to its entry, different companies health care executive already had an answer to it and that was clear: We are not afraid.
“I think we have a lot of capabilities and a value proposition that can compete effectively in the market,” CVS CEO Larry Merlo said back in August.
“I honestly don’t believe that Amazon will be interested in the near future in the next few years in this market,” Walgreens’ CEO Stefano Pessina told investors in an earnings call in July 2017.
The main concern that lies on the market that if Amazon directly goes to insurance companies, it will disrupt the health care adversely. As going directly to insurance companies will lower the drug prices and negotiate directly without any Pharmacy benefit managers[PBM’s]. PBM’s help the insurance companies to lower the drug prices, and enjoy the prescription benefits. It’s a huge business. CVS’ PBM business represented approximately 60% of its overall revenues in 2018, or around $116 billion, according to a person familiar with CVS’ business.
“Given its robust infrastructure, operational capacity, and distribution reach, Amazon-PillPack is uniquely positioned to negotiate directly with payers (insurers) and displace CVS Caremark’s mail-based services,” CVS argued in support of its motion for a preliminary injunction.
In another way, CVS thinks that by hiring John it will approach its clients-insurance plans and offer them a better price. “Most recently, Amazon-PillPack engaged in direct discussions with Blue Cross Blue Shield, a federation of 36 health insurance plans that cover more than 100 million Americans, to provide its members with prescription home delivery,” CVS’ motion reads.
In the ruling, Lavin said that he will be handling PillPack’s negotiation will not be doing what he did for CVS. But Judge John J. McConnell disagreed and granted CVS non-compete agreement. And stated that he can’t work for PillPack for at least 18 months.