Three major hospital systems filed lawsuits against CVS Health and its subsidiaries on Monday. The hospitals accuse the pharmacy giant of running a secret scheme to siphon hundreds of millions of dollars. These funds were originally intended for facilities serving vulnerable and uninsured patients.
Mount Sinai in New York, University of Michigan Health, and the University of Kansas Hospital Authority filed the legal complaints. They claim CVS manipulated reimbursements tied to the federal 340B Drug Pricing Program. The hospitals allege the corporation then kept the resulting difference as pure profit.
The lawsuits claim insurers and patients paid full price for expensive specialty drugs. CVS then allegedly reduced payments to the hospitals through its affiliated companies. These subsidiaries include CaremarkPCS, CVS Specialty, Caremark LLC, and WellPartner.
The healthcare providers estimate they suffered massive financial losses due to the scheme. Mount Sinai claims more than $121 million in losses since 2020. University of Michigan alleges more than $66 million in losses, while the University of Kansas Hospital Authority claims nearly $62 million.
The federal 340B Drug Pricing Program sits at the center of the legal battle. The initiative allows qualifying safety-net hospitals to purchase expensive medications at steeply discounted prices. The facilities are supposed to use the savings to help fund vital community health services.
"Hospitals use 340B savings to provide, for example, free care for uninsured patients, offer free vaccines, provide services in mental health clinics, and implement medication management and community health programs," the American Hospital Association states on its website. The program remains a vital lifeline for many local communities.
A spokesperson for CVS declined to address the specific allegations outlined in the lawsuits. "We do not comment on matters that are subject to ongoing litigation and remain focused on serving our customers and executing our business priorities," the spokesperson told FOX Business in an email.
The University of Michigan complaint claims CVS and its subsidiaries intentionally diverted the revenue for themselves. The lawsuit alleges the company implemented a secret pricing scheme for 340B drugs that required strict cooperation among its affiliated entities.
"CaremarkPCS charged the plan/payor the original higher amount, and the 340B eligible patient the original higher copay just so that defendants retain 340B profits," the Mount Sinai complaint alleges. The hospitals argue this maneuver was entirely deliberate.
The legal complaints point to specific examples involving high-cost specialty drugs like Stelara. The Michigan lawsuit cites an example where a prescription allegedly generated more than $24,000 for the hospital's specialty pharmacy. The hospital claims it only received about $18,000 when processed through CVS Specialty, resulting in a discrepancy of more than $6,500.
"The $6,523.18 reflects the ‘spread’ artificially created and pocketed by the defendants as pure profit," the Michigan complaint alleges. The healthcare providers want these allegedly stolen funds returned immediately.
The hospitals also accuse CVS of refusing necessary audit requests regarding the program. They claim the pharmacy company terminated some agreements after the healthcare providers raised valid concerns.
"Defendants refused to permit an audit and terminated plaintiff from the 340B Contract Pharmacy Arrangement, in retaliation for uncovering the fraudulent scheme described herein and seeking to fulfill their obligations under the 340B Program and HRSA regulations," the Kansas complaint alleges. The facility claims this sudden termination was completely unjustified.
The hospitals are currently seeking damages and the immediate repayment of the alleged profits. They are also asking for court orders requiring CVS to turn over records and stop the alleged practices. A spokesperson for University of Michigan Medicine declined to elaborate, stating, "Because this involves pending litigation, I have no information to share."
Dan Peters, senior vice president and general counsel for The University of Kansas Health System, said they attempted to work through the dispute. "The University of Kansas Health System tried to resolve differences with CVS, but CVS refused to permit a contractually required audit and terminated our 340B agreement," Peters said. "The 340B program allows hospitals to help serve patients in need. We will work to ensure patients continue to benefit from the program."