CVS Health Faces Lawsuit from Major Hospital Systems
On Monday, three prominent hospital systems initiated legal action against CVS Health and its affiliates, alleging a covert scheme that has taken hundreds of millions of dollars from hospitals catering to vulnerable and uninsured patients.
The lawsuit, brought forth by New York’s Mount Sinai, the University of Michigan Health & Sparrow Hospital, and the University of Kansas Hospital Authority, asserts that CVS manipulated reimbursements associated with the federal government’s 340B drug pricing program, pocketing the difference as profit, as detailed in a complaint.
Hospitals claim that, despite insurance companies and patients fully covering the costs of specialty drugs, CVS lowered payments to them through its subsidiaries such as CaremarkPCS, CVS Specialty, Caremark LLC, and WellPartner.
The financial ramifications could be significant. For instance, Mount Sinai has reported losses exceeding $121 million since 2020, while the University of Michigan and Sparrow College state their losses are over $66 million. The University of Kansas Hospital Authority estimates its losses at around $62 million.
Key Issues and Allegations
Central to the lawsuit is the 340B drug pricing program, which enables qualified hospitals to purchase expensive medications at reduced prices, using the savings to support community health initiatives. The American Hospital Association emphasizes that these savings—totaling around $340 billion—are crucial for providing uninsured patients with free care, vaccines, and mental health services.
A spokesperson for CVS stated they do not comment on ongoing litigation but remain committed to serving their customers and business objectives.
The University of Michigan’s complaint highlights how CVS allegedly diverted revenue to itself by employing a secret pricing strategy within the drug supply chain. It accuses Caremark PCS of charging high co-payments to both plan/payers and patients while retaining profits for itself.
Specific examples, such as the high cost of the drug Stelara (used for chronic inflammatory conditions), demonstrate this alleged disparity. For instance, the University of Michigan said that processing Stelara prescriptions through CVS Specialty yielded significantly less revenue—over $6,500 difference—compared to its own specialty pharmacy.
The complaint further claims that CVS denied audit requests and retaliated against hospitals for raising concerns about these practices, terminating pharmacy contracts as a result.
The hospitals are seeking damages, reimbursement of the alleged profits, and a court order for CVS to provide relevant records while stopping these alleged practices.
Last year, a federal judge directed CVS Health’s Caremark to pay nearly $290 million following a whistleblower claim of Medicare overcharging for prescriptions.
Officials from the University of Michigan Medical School have refrained from commenting, citing ongoing litigation, and attempts by FOX Business to reach representatives from Mount Sinai and the University of Kansas Hospital were unsuccessful.
