PROVIDENCE, R.I.–(BUSINESS WIRE)–A new class-action
lawsuit has been filed against CVS Health (NYSE: CVS) alleging that
the company has engaged in a massive fraudulent scheme with third
parties in order to increase profits by driving up generic prescription
drug costs for consumers who purchase them using insurance, according to
Hagens Berman. CVS earns more than $10 billion in profit annually from
The lawsuit, filed Aug. 7, 2017, in the U.S. District Court for the
District of Rhode Island, says CVS knowingly colludes with third-party
pharmacy benefit managers (PBMs) to raise the prices of generic drugs,
charging consumers what it calls a “co-pay,” when in reality a
significant portion of this amount is kicked back to PBMs. CVS also
earns more money from the transaction compared to customers who don’t
PBMs use their marketing leverage with pharmacies to negotiate lower
prices that the insurance companies have to pay to pharmacies.
Pharmacies, in turn, get the benefit of having enrollees in the
insurance plan coming to their stores to get their prescriptions filled.
If you used your insurance plan to fill a prescription for generic drugs
at a CVS pharmacy, you may be entitled to relief. Find
out more about the class-action lawsuit against CVS for prescription
drug cost increases.
“Consumers are led to believe that pharmacists have their best interest
in mind. That’s what CVS would want you to believe, anyway,” said Steve
Berman, managing partner of Hagens Berman. “In reality, CVS is engaging
in a widespread fraudulent scheme to overcharge the public for certain
Berman added, “When customers go to CVS to fill their prescription, they
assume they should use insurance to buy their drugs. In fact,
pharmacists often insist on getting customers’ insurance information,
even if the customers don’t want to use it. Now we know why – pharmacies
are making more money from insurance purchases than cash purchases
because of the secret deals they reached with PBMs.”
Generic Drug Pricing Fraud Explained
The lawsuit details a two-pronged drug pricing scheme perpetrated by CVS
since at least 2010 that attorneys say violates the Racketeer Influenced
and Corrupt Organizations (RICO) Act and federal ERISA laws.
In the first part of the scheme, customers who use their insurance to
fill prescriptions at CVS are actually charged a higher price for the
same medication than those who pay with cash or don’t use their
insurance, according to the suit. CVS never tells customers that they
can save money by not using insurance.
The suit’s named plaintiff, Megan Schultz, used her insurance to
purchase a certain generic drug at her local CVS. Under her plan she
paid $165.68, but if she simply paid in cash, without using her
insurance, she would have paid only $92 – a whopping 45 percent
difference that CVS never told her about.
In the second part of the scheme, CVS overcharges customers by
collecting “co-pays” that exceed the pharmacists’ price and profit,
again unbeknown to the customer, according to the complaint. CVS gives
this extra cash back to PBMs, again part of an undisclosed agreement
between the PBMs and CVS.
“This ‘co-pay’ is not a co-pay at all, but CVS forcing its customers to
overpay for drugs that they could get for cheaper without insurance,”
Berman said. “Much of this money goes to paying off the PBMs who in turn
keep CVS on their pharmacy network.”
These contracts between CVS and the PBMs are sealed from public view
under strict confidentiality agreements, barring consumers from ever
learning the true source of their drug cost.
The lawsuit states that this hidden fraud violates federal racketing
laws. The suit also brings claims of fraudulent concealment, fiduciary
conflicts of interest, lack of adequate care and violations of state
consumer rights laws.
Under ERISA, CVS has an obligation as a fiduciary to act “solely in the
interest of the participants and beneficiaries,” according to the suit,
and attorneys believe that by engaging in this alleged fraudulent
scheme, CVS failed to uphold this duty, and that by basing its profits
in this collusion with a third party, created a blatant conflict of
interest that harmed its customers.
Berman added, “In 2016, CVS proclaimed in a ‘social responsibility’
report that it is ‘committed to bringing accessible and affordable care
to as many people as we can. It’s the right thing to do…’ Despite that
awareness, CVS has only sought to profit from those it serves.”
Read more about the lawsuit
Hagens Berman Sobol Shapiro LLP is a consumer-rights class-action law
firm with offices in 10 cities. The firm has been named to the National
Law Journal’s Plaintiffs’ Hot List eight times. More about the law firm
and its successes can be found at www.hbsslaw.com.
Follow the firm for updates and news at @ClassActionLaw.