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Lawsuit Alleges CVS Health Conspired with PBMs to Increase Profits

Rhode Island lawsuit claims overcharged customers for certain drugs when using insurance instead of paying cash.
Published Online: Aug 10,2017
Laurie Toich, Assistant Editor
The District Court of Rhode Island filed a class-action lawsuit against CVS Health alleging the company conspired with pharmacy benefit managers (PBMs) to increase profits and inflate the cost of generic drugs.

Annually, CVS generates $10.3 billion in profits from prescription drugs. The company states that it provides affordable drugs for patients; however, the new lawsuit states that CVS customers are not actually receiving the most affordable options and are being overcharged for certain generic drugs.

The lawsuit alleges that CVS deliberately overcharges for certain drugs when patients use insurance compared with patients who pay cash. However, CVS Health said in an emailed statement to The American Journal of Pharmacy Benefits that the allegations in the suit are baseless.

"The allegations against us made in this proposed class action suit are built on a false premise and are completely without merit. Co-pays for prescription medications are determined by a patient’s prescription coverage plan, not by the pharmacy. Pharmacies collect the co-pays that are set by the coverage plans," CVS said in the statement.

In the suit, plaintiff Megan Shultz said that she paid $165.68 with insurance for a drug, but only would have paid $92 in cash. Shultz claims that CVS did not inform her that she would save money by bypassing her insurance. The court alleges that CVS’ silence was the result of a fraudulent scheme with large PBMs.

Another aspect of the alleged scheme involves overcharging patients through high co-payments that exceed the price and profit of the drugs. After collecting the fee, CVS allegedly forwards the excess money to the PBM, according to the lawsuit.

“Although the customers are told, for example, that they are required to pay $15 in a ‘co-pay’ for the drug, in reality this is not a ‘co-pay’ at all because CVS is sending a significant portion of the $15 back to the PBMs,” court documents state.

Schultz said that she paid $101.49 for another drug at CVS using insurance, but the cash price was only $49.45. In this case, the insurance company paid less than the customer’s co-pay due to agreements between CVS and PBMs.

The lawsuit claims that CVS was motivated by profit to enter into these contracts with PBMs to increase drug costs for patients.

Under the Employee Retirement Income Security Act of 174, CVS and entities that control assets of health plan enrollees have a fiduciary duty to the individuals and are obligated to provide services in the best interest of customers, according to the suit.

By engaging in an alleged scheme, the suit alleges that CVS is in violation of their responsibilities.

The lawsuit aims to permanently stop CVS from engaging in the aforementioned practices; cost, restitution, damages, and disgorgement to be determined at trial; treble damages and attorney fees, pre- and post-judgement interest; and other relief at law or equity the court deems acceptable.

However, CVS denies the allegations. 

"Our pharmacists work hard to help patients obtain the lowest out-of-pocket cost available for their prescriptions," CVS told The American Journal of Pharmacy Benefits. "Also, our PBM CVS Caremark does not engage in the practice of co-pay clawbacks. CVS has not overcharged patients for prescription co-pays, and we will vigorously defend against these baseless allegations."