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Several Henry Ford Health and University of Michigan hospitals are suing CVS Health for allegedly manipulating reimbursements from a federal drug pricing program and keeping a combined $95 million for itself instead of sending the money back to hospitals to fund care for indigent and uninsured patients.
Hospitals like Detroit-based Henry Ford and Ann Arbor-based UM are able to receive discounts on drug costs and use those savings to finance medical care for people in need under the federal pricing program, according to two lawsuits, one filed by Henry Ford on July 16 and the other filed by UM in May. But CVS and its pharmacies have allegedly conspired to redirect a "substantial portion" of those savings to itself, stopping the money from reaching indigent and uninsured patients, according to the lawsuits.
CVS did not immediately respond Wednesday to a request for comment. CVS Health is a company that owns a major retail pharmacy chain of about 9,000 pharmacy locations, the health insurance provider Aetna and a pharmacy benefits manager.
But other hospital systems have sued over the same issue, including the University of Kansas. A CVS spokesperson told Fox Business in May that the company doesn't comment on ongoing litigation.
Henry Ford said it estimates CVS has led to more than $29 million in losses since 2020, and UM said it estimates the actions of CVS have led to $66 million in losses in that period, according to each of the lawsuits. CVS has allegedly refused the hospital's requests to access data and conduct an audit to determine the full scope of CVS's alleged profits from the 340B program.
"Indeed, both payors and patients are paying for the drugs at the full standard reimbursement rate, and they are not refunded the difference, which is pocketed by Defendants," according to the lawsuits. "Defendants’ fraudulent, unlawful, and deceptive practices have harmed Plaintiffs by taking millions of dollars that were supposed to flow to Plaintiffs to fund the provision of charitable medical care to the uninsured and under-insured."
Congress enacted the 340B drug pricing program to provide financial support to community hospitals, federally qualified health centers, and other safety net providers that serve low-income and uninsured patients. They're able to receive discounts on drug costs and use those savings to fund medical care for people in need. But CVS and its pharmacies have allegedly conspired to redirect a "substantial portion" of those savings to itself, stopping the funds from reaching indigent and uninsured patients.
Under this program, drug manufacturers are required to charge hospitals and other 340B providers no more than a significantly discounted ceiling price on some outpatient prescription drugs, according to the lawsuits. The hospitals are then able to "pass on" those savings to patients through lower costs for medications or through reimbursements for the drugs that then can be used to finance other unfunded areas of their operations.
Hospitals like Henry Ford and UM aren't always able to fill prescriptions at their own pharmacies, so they entered agreements with CVS pharmacies, according to the lawsuits. The hospitals allowed CVS to keep a dispensing fee, and CVS was supposed to send back all payments received for the drug.
But CVS has allegedly been keeping more revenue from the drugs than it should have by conducting a "secret pricing scheme" for the drugs, allowing CVS to keep a "significant portion" of the money intended to go to the hospitals, according to the lawsuits.
Henry Ford said CVS and Caremark pocketed about 55% of the 340B savings, compared with 44.5% of the savings the hospitals saw. UM said CVS and Caremark pocketed about 60% of the savings, and UM got about 40%.
Henry Ford and UM are seeking the lost revenue from the 340B program and are looking to be reimbursed three times the 340B revenue and extras that CVS allegedly improperly retained.
This article originally appeared on The Detroit News: Michigan hospitals say CVS improperly kept $95M in drug savings scheme
