5 more things to know about 3 hospitals’ $250M case against CVS

Last week hospitals owned by three big health systems filed suit against CVS Health. The trio filed separately, but all accuse the corporation of robbing them of funds they’re owed through the federal 340B drug pricing program. 

The 340B program mandates that drugmakers deeply discount medications they supply to provider organizations serving low-income and uninsured populations. 

The idea is to oblige pharma companies to collaborate with safety-net providers on passing along significant savings to vulnerable patients. 

The suits allege CVS Health and subsidiaries cooked up a stealthy and wrongful pricing scheme, according to numerous press reports. By this subterfuge, the three claim, CVS pharmacies conspired to redirect 340B funds from the hospitals to themselves between 2020 and 2025. 

“By surreptitiously diverting funds, Defendants prevent the critical 340B revenue from reaching Covered Entities”—in this case the hospitals—and “ultimately indigent and uninsured patients—the intended beneficiaries of the 340B Program,” one of the lawsuits reads. 

Taken together, the three suits charge CVS with bilking the hospitals of close to $250 million. 

The three organizations whose hospitals are taking legal action against CVS are the University of Michigan, University of Kansas and Mount Sinai health systems. 

Each one filed suit in its respective home state. 

Here are five additional facts shedding additional light on the situation. 

1. CVS is also accused of racketeering.

Quoting the relevant statutes, the Michigan lawsuit demands a jury trial and says CVS’s predicate acts of racketeering include 

• embezzlement from employee benefit plan, which makes it unlawful for ‘any person who embezzles, steals, or unlawfully and willfully abstracts or converts to his own use or to the use of another, any of the moneys, funds, securities, premiums, credits, property, or other assets of any employee welfare benefit plan or employee pension benefit plan, or of any fund connected therewith; 
  
  and 
  
   
• [making] offer, acceptance or solicitation to influence operations of employee benefit plan, which makes it unlawful for any agent or representative of organizations providing services to an employee welfare benefit plan to, inter alia, receive any kickback, commission, gift, loan, money, or thing of value in respect to any of the actions, decisions, or other duties relating to any question or matter concerning such plan that exceeds the bona fide salary, compensation, or other payments that the agent is owed for its services.

2. The suits seek more than just damages. 

The plaintiffs also want an injunction to halt CVS Health from continuing the deceptive pricing practices at hand. Plus they’re looking for CVS to repay the diverted monies, turn over financial records and, according to Becker’s, reinstate contracts the corporation terminated when at least one of the hospitals asked for routine audits.  

3. So far, CVS isn’t saying much.

A spokesperson from CVS Health tellsM Live in Michigan that the company does not comment on ongoing litigation but remains “focused on serving our customers and executing our business priorities.”

4. This is the latest in a series of skirmishes over 340B. 

Hospitals and insurance companies have been waging legal battles for years over the 340B program, Modern Healthcare points out. “Providers have sought to protect those drug savings while insurers have tried to limit the program,” the outlet adds, noting that federal regulators are considering whether to implement a pilot program that would replace upfront 340B payments with a rebate model. 

 

5. Three suits add up to one big alleged scam.  

The collective $250 million estimate breaks down as follows: Mount Sinai claims more than $121 million in losses since 2020; University of Michigan (with UM Health-Sparrow) allege more than $66 million in losses; and University of Kansas Hospital Authority alleges nearly $62 million in losses.

Fox Business notes that, last year, a federal judge ordered CVS Health’s Caremark to pay nearly $290 million after a whistleblower accused the company of overcharging Medicare on prescription drugs.