Health Plans Say CVS, Pharmacy Middlemen Hid Prices

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By Dana A. Elfin

CVS Pharmacy Inc. conspired with several of the nation’s largest pharmacy middlemen to hide the lowest prices they offered for generic drugs, two union health plans say.

The allegations against CVS, its pharmacy benefit manager subsidiary Caremark Rx, and other PBMs, including Express Scripts Inc. and UnitedHealth Group Inc.’s OptumRx Inc., adequately stated federal racketeering claims, Chief Judge William E. Smith of the U.S. District Court for the District of Rhode Island said. Smith allowed the plaintiffs to add the claims to their original fraud complaint against CVS.

The claims against CVS and the PBMs are emblematic of an increasing wave of criticism aimed at retail pharmacies and PBMs over allegedly unfair drug pricing practices. In February, independent pharmacists in Arkansas complained about CVS Caremark’s reimbursement rates. The group is calling for legislation that would provide greater state oversight of all PBMs operating in the state. Iowa, Kentucky, New Mexico, New York, Texas, and West Virginia are among the states currently grappling with similar PBM reimbursement issues.

The added claims allege CVS conspired with the PBMs to hide from the health plans the lowest prices it charged individual cash-paying CVS customers for certain generic drugs. The plans allege CVS kept secret the prices it charged cash-paying customers under its now-discontinued Health Saving Pass (HSP) program so it didn’t have to offer the same discounts to them.

The plaintiffs allege in their original complaint that CVS fraudulently overcharged them by collecting more for generic drugs than it was allowed to do under the National Council for Prescription Drug Program. According to this complaint, the HSP program, which CVS developed to compete with big-box retailers such as Walmart Inc., was a key component of CVS’s fraud.

Lowest Price Concealed From Plans

For a nominal program fee, the HSP program allowed cash-paying CVS customers to access discounted generic drug prices. But because the HSP prices weren’t made available to the general public, CVS didn’t include the HSP discounted price in the “Usual and Customary” price it reported as the lowest net cash price cash-paying customers would have paid for certain generic drugs.

The plaintiffs allege CVS teamed up with the PBMs to keep the HSP price a secret from the health plans. Smith said those allegations sufficed at this stage of the litigation.

“To be sure, Plaintiffs do not allege an explicit agreement among the PBMs to look the other way as CVS failed to report HSP prices,” Smith said. “But they do allege the PBMs communicated with each other and with CVS in order to orchestrate the alleged fraud,” he said, and that was enough to justify allowing the plans to add the racketeering claims to their complaint.

The case is Sheet Metal Workers Local Welfare & Benefit Fund v. CVS Pharmacy, Inc. , 2018 BL 113829, D.R.I., 20 C.A. No. 16-46 WES C.A. No. 16-447 WES, 3/31/18 .

To contact the reporter on this story: Dana A. Elfin in Washington at delfin@bloomberglaw.com

To contact the editor responsible for this story: Randy Kubetin at rkubetin@bloomberglaw.com

For More Information

The ruling is at http://src.bna.com/xuW.

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