CVS Health Faces Legal Challenges Over Alleged Misuse of 340B Program Funds
Several prominent academic and nonprofit health systems have initiated lawsuits against CVS Health, claiming that the company and its subsidiaries improperly retained approximately $250 million from the 340B Drug Pricing Program savings between 2020 and 2025.
Details of the Legal Complaints
Earlier this week, federal courts in New York, Kansas, and Michigan received the legal complaints. The plaintiffs in these cases include esteemed institutions such as member hospitals of Mount Sinai, the University of Kansas Health System, and the University of Michigan Health.
Jonathan Levitt, the founding partner of Frier Levitt, which represents the plaintiffs, stated, “CVS Health’s mission statement commits the company to reducing the cost of care and improving the health and well-being of those it serves. What our complaints allege is the opposite: Behind the scenes, CVS systematically diverted funds that Congress had specifically earmarked to help safety-net hospitals care for the most vulnerable Americans—and pocketed them as corporate profits.”
Understanding the 340B Program and Alleged Misconduct
The 340B program mandates drug manufacturers to offer discounts on products sold to safety net providers. The process can involve pharmacy benefit managers (PBMs) who bill insurers on behalf of 340B providers, contract pharmacies that dispense the discounted medication, and an external administrator who determines which claims are eligible for discounts.
According to the complaints, CVS Health subsidiaries, including CaremarkPCS, Caremark LLC, CVS Specialty, and Wellpartner, had arrangements with the plaintiff hospitals in each of these roles. The hospitals claim that the subsidiaries conspired to secretly reduce the 340B transfer passed on to them, thereby keeping more of the $340 billion in revenue for themselves.
Allegations Against CVS Health Subsidiaries
The lawsuits specifically allege that Wellpartner, a third-party administrator, discreetly transfers claims eligible for a 340B discount to its sister companies after the sale. These sister companies then negotiate an artificially lower rate among themselves, retaining the difference between the amount paid by third-party insurers and the reduced reimbursement amount.
As stated in the lawsuits, “In short, this system could not function without vertical integration. It requires a PBM willing to artificially lower point-of-sale reimbursement rates, a contract pharmacy willing to accept that reduced rate, and a captive [third-party administrator] willing to hide the true transaction from the covered entity.”
Financial Impact and Response from Hospitals
The hospitals assert that this practice is ongoing, siphoning a total of $250 million from their organizations—approximately 56% of the program’s total savings from 2020 to 2025. They arrived at this estimate after conducting “an internal investigation using a subset of claims and available referral data.” Despite a provision in their agreements allowing access to relevant data, the hospitals claim that CVS companies have not responded to reasonable requests for a transparent review.
The hospitals are seeking a court ruling that CVS Health and its subsidiaries breached their contracts, along with a full accounting of the amounts allegedly withheld and compensation for the plaintiffs.
Levitt emphasized, “Hospitals are seeking full accountability and recouping funds that should have gone toward improving access to care in underserved communities.”
CVS Health’s Position
A CVS Health spokesperson stated that the company does not comment on matters subject to ongoing litigation, adding that it remains focused on serving customers and executing business priorities.
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