Several academic and nonprofit health systems have filed lawsuits against CVS Health, accusing the company and its subsidiaries of improperly pocketing about $250 million of 340B Drug Pricing Program savings from 2020 to 2025.
The providers’ legal complaints were filed earlier this week in New York, Kansas and Michigan federal courts. Among the plaintiffs are member hospitals of Mount Sinai, the University of Kansas Health System and the University of Michigan Health.
“CVS Health’s mission statement commits the company to lowering the cost of care and improving the health and well-being of those it serves,” Jonathan Levitt, founding partner at Frier Levitt, which is representing the plaintiffs in all three filed suits. “What our complaints allege is the opposite: that behind the scenes, CVS systematically diverted funds Congress specifically designated to help safety-net hospitals care for the most vulnerable Americans—and pocketed them as corporate profit.”
The 340B program requires drug manufacturers to discount products sold to safety-net providers. Potentially involved in the process are pharmacy benefit managers, who bill insurers on behalf of 340B providers; contract pharmacies, that dispense the discounted drugs; and a third-party administrator that identifies which claims are for discounted drugs after the fact.
The plaintiff hospitals had such agreements in place with CVS Health subsidiaries in each of these roles—CaremarkPCS, Caremark LLC, CVS Specialty and Wellpartner—for which the subsidiaries were “well compensated” with dispensing and administrative fees, according to the complaints. However, the hospitals allege that “to divert and retain even more of the 340B revenue for themselves, [the subsidiaries] conspired to secretly and drastically lower the 340B Remittance that would be passed on to the Plaintiff.”
Specifically, the lawsuits allege that third-party administrator Wellpartner would discreetly flag claims eligible for a 340B discount after the point of sale to its sister companies, who would then negotiate an artificially lower rate between each other while retaining the difference between the amount paid by outside insurers and the reduced reimbursement amount.
“In short, this scheme could not function without vertical integration,” the lawsuits read. “It requires a PBM willing to artificially slash reimbursement rates after the point of sale, a contract pharmacy willing to accept that reduced rate, and a captive [third-party administrator] willing to mask the true transaction from the Covered Entity.”
The hospitals alleged that the practice is ongoing and has pulled a collective $250 million from their organizations—or about 56% of the program’s total savings from 2020 to 2025. Each said they came to that estimate after conducting “an internal investigation using a subset of claims and available remittance data,” but said that the CVS companies have resisted “reasonable requests to access relevant data and conduct a transparent audit” despite a provision in their agreements permitting so.
The hospitals are requesting that the courts declare that CVS Health and its subsidiaries breached their contracts, provide a full accounting of the amounts they allegedly retained, and remit those to the plaintiffs as compensation.
“The hospitals are seeking full accountability and recovery of the funds that should have gone to expanding access to care for underserved communities,” Levitt said.
A spokesperson for CVS Health said the company does not comment on “matters that are subject to ongoing litigation and remain focused on serving our customers and executing our business priorities.”