Henry Ford Health recently filed suit in federal district court against CVS Health and its affiliates, claiming an improper diversion of more than $29 million in savings derived from the federal 340B Drug Pricing Program. In its lawsuit, Henry Ford Health, which consists of four hospitals, alleges that CVS manipulated reimbursements for specialty drugs to avoid remitting the funds to it under a pharmacy services agreement. Other CVS affiliates named as defendants in the suit include CaremarkPCS Health, CVS Specialty, and WellPartner.
According to Henry Ford, CVS exercised its control over different steps in the prescription-drug payment process to keep funds that Henry Ford should have received under pharmacy services agreements. These legal claims include racketeering claims under the federal RICO statute.
The 340B program allows eligible hospitals and healthcare providers to buy outpatient drugs at a discount. The purpose of the 340B program is to allow covered entities to make federal resources go further, reach more patients, and offer more comprehensive healthcare services. Hospitals commonly contract with outside pharmacies to fill prescriptions for specialty drugs that their own pharmacies cannot fill.
Henry Ford had an agreement with CVS that allowed CVS Specialty to keep a dispensing fee. However, the agreement also required CVS to remit any remaining third-party reimbursement to Henry Ford.
Henry Ford claims that CVS used a back-end pricing process to reduce reimbursement for prescription drugs that were 340B-eligible. Using this mechanism allowed CVS affiliates to keep the difference in reimbursement rates. As a result, Henry Ford estimates that CVS and Caremark kept about 55% of the savings from drugs filled under the pharmacy services agreements, while Henry Ford received only about 44.5%. CVS then terminated its pharmacy services agreements in April, which Henry Ford claims was a retaliatory move.
In its suit, Henry Ford is asking for repayment of the savings that CVS allegedly retained inappropriately, treble damages, reinstatement of the terminated agreements, and an injunction barring CVS’s back-end pricing practices concerning claimed eligibility under the 340B program.
This lawsuit mirrors allegations that the other hospitals have made against CVS, including the University of Michigan Health System, Mount Sinai Health System, and the University of Kansas Health System. Collectively, these health systems allege that CVS diverted about $250 million in 340B program savings over five years.
According to the University of Michigan Health System, CVS initially processed claims pursuant to pharmacy services agreements at standard network reimbursement rates. However, after WellPartner identified them as claims subject to the 340B program, CVS reprocessed the claims at lower rates. For instance, a Stelara prescription initially resulted in a reimbursement of $24,878 through a University of Michigan specialty pharmacy, but $18,456 through CVS Specialty.
Both Henry Ford and University of Michigan also claim that CVS has refused to provide records necessary to audit the agreements. The suits describe CVS’s alleged actions as a way to increase its profits by diverting funds meant to support safety-net hospitals, a claim CVS denies.
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