Jonathan Levitt, founding partner at Frier Levitt, said three federal lawsuits allege CVS Health and affiliated entities diverted about $250 million in savings tied to the 340B Drug Pricing Program from hospitals between 2020 and 2025.
The allegations were outlined in a May 21 news release announcing federal lawsuits filed in New York, Michigan, and Kansas against CVS Health Corporation and affiliated entities including CaremarkPCS Health, Caremark, CVS Specialty, and WellPartner.
“What our Complaints allege is the opposite: that behind the scenes, CVS systematically diverted funds Congress specifically designated to help safety-net hospitals care for the most vulnerable Americans — and pocketed them as corporate profit,” Levitt said.
The complaints allege the companies used 340B specialty drug claims and reimbursement arrangements to retain the spread between insurer payments and the amounts reported to hospitals.
Healthcare Dive reported the lawsuits were brought by hospitals affiliated with Mount Sinai, the University of Michigan Health, and the University of Kansas. According to the complaints, CVS-linked entities flagged certain drug claims as 340B-eligible weeks after sale and after insurers had already reimbursed CVS at full network rates. The filings also allege CVS terminated some contract pharmacy arrangements after hospitals requested audits of reimbursement records.
Levitt said the cases center on how 340B contract pharmacy reimbursements are handled and whether hospitals were accurately credited for discounted drug pricing intended for safety-net care.
“But hospitals expect the PBM and their specialty pharmacy partner to report accurately, and that is exactly what CVS allegedly exploited,” Levitt said.
“Concealment changes the legal calculus significantly. A breach of contract claim addresses the failure to perform a contractual obligation,” he added. “But when a party doesn't just fail to perform, when it actively hides information, the conduct moves into a different category. Uncovering the spread between what CVS received and what it reported to the hospitals generally requires a sophisticated review of data and expertise in the drug space.”
Pharmacy benefit managers (PBMs) and major pharmacy chains play a central role in the 340B contract pharmacy system. AIR340B reports that CVS Caremark, Express Scripts, and OptumRx collectively handle a large share of prescription claims in the U.S., and that contract pharmacy margins for 340B drugs are significantly higher than those for non-340B prescriptions dispensed at independent pharmacies.
Frier Levitt is a healthcare, life sciences, and pharmacy law firm that provides legal guidance to healthcare and life sciences clients on regulatory complexity. The firm represents healthcare providers and institutions in matters involving the 340B Drug Pricing Program, pharmacy benefit managers, and federal healthcare programs.
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