CVS sued over drug co-pay ‘claw­backs’

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - In­for­ma­tion for this ar­ti­cle was contributed by Jef Fee­ley, Jared S. Hop­kins and Justin Mat­tingly of Bloomberg News and by Tom Mur­phy of The Associated Press.

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.

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