8 Companies Claim CVS Health Overcharged for Prescription Drugs

May 28, 2021 - Several companies are filing a lawsuit against CVS Health, claiming that the retail pharmacy chain intentionally overcharged plaintiffs for prescription drugs by submitting claims for payment at artificially inflated prices. 

The companies include Plaintiffs CareFirst of Maryland, Group Hospitalization and Medical Services, CareFirst BlueChoice, Blue Cross and Blue Shield of South Carolina, BlueChoice HealthPlan of South Carolina, Louisiana Health Services & Indemnity Company, Blue Cross and Blue Shield of Louisiana, and HMO Louisiana. 

The lawsuit was filed in May 2021. 

In the lawsuit, the companies claim that CVS offered hundreds of generic drugs at low, discounted prices through its cash discount programs: Health Savings Pass (HSP) Program and the Value Prescription Savings Card (VPSC) Program, the successor to the HSP program. 

When HSP was rolled out, anyone could become a member. CVS described the program as a “cash program,” “cash card,” or “cash script.” Ultimately, CVS marketed the program as a “discount.” 

CVS created and maintained the programs for two reasons.

First, to compete for cash customers who might otherwise be attracted to discounts offered by CVS’s competitors. And second, to hide its true prices from third-party payers, including plaintiffs, the lawsuit claims. 

The lawsuit also alleges that CVS intentionally told third-party payers, including plaintiffs, that the prices charged to cash customers for generic drugs in these programs were higher. 

Third-party payers then reimbursed CVS based on those higher, inflated prices, instead of the actual lower prices that CVS offered to the general public, plaintiffs claim. 

When a customer purchases drugs at CVS using insurance, the company submits the claim for dispensing and adjudication. 

Pharmacy Benefit Managers (PBMs) play a crucial role in adjudication and in this action. PBMs act as middlemen between CVS and plaintiffs and negotiate drug prices and the management of prescription billing. 

Plaintiffs’ reimbursement arrangements with PBMs provide that if the usual and customary  (U&C) price is lower than the negotiated price, plaintiffs only have to pay the U&C price.  

This process ensures that plaintiffs do not pay more for a given generic drug than a customer who pays out-of-pocket without any insurance. 

But U&C prices are almost always higher than the negotiated prices in the PBM contracts, plaintiffs argue. CVS can control the U&C price and, therefore, ensure that the U&C price is always higher than the negotiated price. 

Ultimately, the plaintiffs claim that CVS knew that a discounted price offered to a cash customer constituted its true U&C price and that this discounted cash price must be reported to third-party payors as that specific price.

But CVS countered that when customers paid the HSP price, they were not paying the cash price offered to a member of the general public or paying for a prescription drug without insurance or the U&C price but were paying a discounted price.

In reality, the HSP price was the most common price charged to cash customers, regardless of whether a cash customer was enrolled in the HSP program, according to the lawsuit. 

CVS terminated the HSP program in 2016 to avoid being caught for its fraudulent activities, plaintiffs contend. And CVS’s new VPSC program essentially did the same thing the HSP program did. CVS moved its customers to the VPSC program and continued offering discounted cash prices to the general public, but not reporting those prices. 

“For many millions of transactions, CVS caused Plaintiffs to pay CVS the negotiated price because the negotiated price was lower than the inflated U&C price that CVS reported,” the lawsuit said.

“For those many millions of transactions, CVS should have reported the true U&C price. Had it done so, the adjudicated price would have, in many cases, been lower than what Plaintiffs paid based on CVS reporting a false and inflated U&C price,” the lawsuit continued.