CVS wins California drug overcharge trial

CVS Pharmacy on Wednesday was cleared of allegations that it overcharged multiple classes of insured customers by more than $121 million for generic drugs.

The individually insured customers representing classes from six states alleged that by not reporting its discounted prices for health savings pass program members as its “usual and customary” prices, CVS was in violation of state consumer protection statutes.

However, a federal jury in California unanimously absolved CVS of these claims after less than a day of deliberation. A CVS spokesperson said the company was pleased with the verdict.

“We did not overcharge plans for prescription drugs, and we will continue to vigorously defend against these baseless allegations, which are completely without merit,” a CVS spokesperson said in a statement. “Generic drug prices available through these programs were not the usual and customary price charged by CVS Pharmacy, nor the price available to the general public. Neither of these programs were in any way concealed, nor fraudulent.”

The trial was one of several lawsuits nationwide that accuse CVS of not releasing the real costs of medications, and conspiring with pharmacy benefit managers in overcharging health plans and insured drug buyers.

CVS’ health savings pass program, which no longer exists, is a focal point of controversy in the overcharge cases, as it offered a cash discount to uninsured program members for 400 commonly used drugs.

The plaintiffs argued that they had to pay higher co-pays because CVS reported higher drug prices to PBMs than what health savings pass members paid. This led to higher prices being used to negotiate reimbursement deals with insurance companies, allegedly costing patients more than $100 million over a seven-year period.

Legal counsel for the plaintiffs declined to comment.

During the trial, CVS said disclosing these prices was not required in its contracts with PBMs, and not reporting discounted drug prices helped it avoid losing $500 million annually.

The company also claimed that 95% of insured customers paid less for prescriptions under the health savings pass program than they would have otherwise.

“The CVS Pharmacy health savings pass was a membership program intended for customers who either did not have insurance or chose not to use insurance,” a spokesperson said.

While discount programs are doing the right thing by protecting uninsured and underinsured people from incentives that pressure pharmacies to raise their prices, said Antonio Ciaccia, president of 3 Axis Advisors, he added that they are just Band-Aids on a broken system.

Since customers can opt into discount programs, CVS is not breaking contracting requirements by tailoring its usual and customary price differently to different market segments, he said.

But no patient should be exposed to “wildly inflated sticker prices,” Ciaccia said.

“It’s not just CVS,” Ciaccia said. “Every pharmacy for the most part does this, until we have wholesale reforms that get rid of the arbitrage opportunities on these drugs. This is really only the beginning of the problem.”

CVS is currently facing lawsuits from numerous insurers, including Carefirst of Maryland, Group Hospitalization and Medical Services, Capital BlueCross, Highmark, HealthNow, Horizon Healthcare Services and Blue Cross and Blue Shield affiliates that seek to claim damages after allegedly overpaying for millions of medication transactions.


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