CVS sued over drug co-pay ‘clawbacks’
A California woman suing CVS Health Corp. claims that for certain prescription drugs, the drugstore operator charged customers copayments that exceeded the cost of the medicines.
The pharmacy chain overbilled consumers who used insurance to pay for some generic drugs and wrongfully hid the fact that the medicines’ cash price was cheaper, Megan Schultz said in her lawsuit filed Monday. Schultz said that in one instance, she paid $166 for a generic drug that would have cost only $92 if she’d known to pay cash.
CVS “remained silent and took her money” because the chain was in cahoots with the pharmacy benefit managers who got the extra copay money, the lawsuit said. The “clawbacks” of Schultz’s generic-drug co-pays were
made under CVS’ agreements with benefit managers such as Express Scripts Holding Co. and CVS Caremark.
The suit was filed in federal court in Rhode Island. CVS is based in that state.
“CVS, motivated by profit, deliberately entered into these contracts, dedicating itself to the secret scheme that kept customers in the dark about the true price” of drugs they purchased, Schultz’s lawyers said in the suit, which is seeking class-action status.
CVS officials rejected Schultz’s claims and said the co-pays are determined by the benefit managers. “The allegations against us made in this proposed class action suit are built on a false premise and are completely without merit,” CVS spokesman Michael DeAngelis said Tuesday in an email.
The CVS lawsuit follows at least 16 other suits around the U.S. targeting drugstore chains’ co-pay clawbacks. The practice occurs when patients are charged co-payments set by a benefit manager that exceed the actual cash cost of the drug. The benefit managers pocket the difference.
Suits over the practice have been filed against United-
Health Group Inc., which runs the benefit manager OptumRx; Cigna Corp., which contracts with OptumRx; and Humana Inc. The lawsuits allege that the benefit managers defrauded consumers and violated federal laws.
Most patients never realize there’s a cheaper cash price because of clauses in contracts between pharmacies and benefit managers that bar the drugstore from telling people there’s a lower-cost way to pay.
Some states, such as Connecticut, have passed laws prohibiting clawbacks. Connecticut’s statute, which goes into effect in January, will allow pharmacists to tell patients it’s cheaper to pay cash for some of their drugs.
Schultz contends that CVS’ clawback agreements with benefit managers violate federal racketeering and insurance laws and work to artificially inflate prescription costs.
Neither OptumRx spokesman Andrew Krejci nor Express Scripts’ spokesman Jennifer Luddy immediately returned calls for comment Tuesday on Schultz’s suit. None of the benefit managers were named as defendants in the case.
The case is Megan Schultz
v. CVS Health Corporation, 17cv-359, U.S. District Court for the District of Rhode Island (Providence).
Reporting quarterly earnings Tuesday, CVS said it beat expectations despite a sales slump from established drugstores.
CVS said sales from stores open at least a year slid nearly 3 percent. The company said a rise in generic drug prescriptions hurt the top line of its pharmacies and that it had fewer customer visits. Revenue from stores open at least a year is considered a key indicator of a drugstore chain’s financial health because it eliminates the effect of stores that have recently opened or closed.
CVS Health runs 9,700 retail locations, counting the pharmacy and clinic businesses of retail giant Target Corp. That total is second only to Walgreens. CVS Health also processes more than 1 billion prescriptions annually as a pharmacy benefits manager.
Overall, CVS Health’s second-quarter earnings of $1.1 billion marked a sharp rise compared with the same quarter last year, when the company booked a $542 million loss on the early retirement of some debt.
The company reported adjusted earnings of $1.33 per share. Revenue rose 4 percent to $45.68 billion.
Analysts forecast earnings of $1.31 per share on $45.35 billion in revenue, according to FactSet.
The company also said Tuesday that it now expects adjusted earnings of $5.83 to $5.93 per share in 2017, as it raised the lower end of its previous forecast from $5.77 per share.
Analysts expect, on average, earnings of $5.87 per share in 2017.
CVS shares fell 55 cents, or 0.7 percent, to close Tuesday at $78.57.
CVS customers visit a store in Hialeah, Fla., in May. The pharmacy chain faces another lawsuit claiming it charged customers co-payments for certain prescription drugs that exceed the cost of medicines.