Dive Brief:
- Hospitals owned by three major health systems sued CVS Health this week for allegedly stealing hundreds of millions of dollars in their savings from a federal drug discount program.
- The lawsuits allege that CVS and its pharmacy subsidiaries implemented a “secret pricing scheme” by artificially depressing payment to hospitals for drugs in the 340B discount program and pocketing the difference paid from insurers. CVS diverted about $250 million from 2020 to 2025 through the scheme, the hospitals say.
- The three separate lawsuits include plaintiff hospitals owned by Mount Sinai, the University of Michigan Health and the University of Kansas. CVS declined to comment, citing ongoing litigation.
Dive Insight:
The 340B program was created in 1992 to provide discounted drugs to safety-net hospitals and clinics serving low-income or uninsured patients.
Providers say these discounts, which can generally be 25% to 50% off the list price of a drug, allow them to care for more needy patients while keeping their doors open.
However, CVS and its vertically integrated pharmacy assets aren’t letting 340B’s full savings flow to their hospital clients, according to the lawsuits filed Monday.
The lawsuits allege that CVS’ third-party administrator flags drug claims as eligible for 340B weeks after the drugs are sold — and after insurers already reimbursed CVS at full network rates. CVS’ pharmacy benefit manager and the company’s pharmacies then allegedly artificially lower how much hospitals are reimbursed, and keep the resulting “spread” as profit.
“These affiliated entities work together behind the prescription drug transaction to secretly manipulate the 340B reimbursement rate while concealing their scheme,” according to the lawsuit filed by the Michigan hospitals.
The hospitals are seeking “full accountability and recovery” of the 340B funds, Frier Levitt, the law firm representing the hospitals, said in a Thursday statement.
Lawmakers and regulators have accused PBMs, powerful middlemen in the pharmaceutical supply chain, of engaging in opaque pricing arrangements and driving up the cost of drugs.
Critics say there is little transparency into the business practices of the largest PBMs, which dominate the market and are all owned by major health insurers. Just three PBMs — CVS’ Caremark, Cigna’s Express Scripts and UnitedHealth’s Optum Rx — jointly control about 80% of all U.S. prescriptions.
In response to calls for reform, the largest PBMs have pledged to make their businesses more transparent and simple by shifting to new reimbursement arrangements, sparking a sea change in pharmacy benefits models.
The 340B program could be facing its own overhaul, after the Trump administration attempted to send 340B savings to hospitals through rebates instead of upfront discounts on drugs.
Providers have urged the government to abandon the plan, arguing rebates would impose undue costs on hospitals and jeopardize patient care.
