Attorney General sues CVS for harming safety net hospitals, clinics, diverting from underserved communities
The Attorney General sued CVS Health Corporation on Friday, July 29, under violations of antitrust law and harm done to safety net hospitals in New York. Allegedly, CVS owned and operated a subsidiary it used to obtain federal subsidies on prescriptions, also draining public funds by forcing safety net hospitals to exclusively use Wellpartner, a third-party administrator (TPA), and incur millions in additional costs through retraining and hiring staff, while CVS benefited through its subsidiary.
“While safety net health care providers are tackling public health crises and helping underserved communities, CVS is robbing them of millions of desperately needed funds that could improve patient care,” said Attorney General Letitia James.
The federal 340B program allows safety net hospitals and clinics to purchase drugs at discounted prices and allot funding elsewhere. Hospitals who use the 340B program must contract with pharmacies, and the suit alleges that CVS never contracted with New York safety hospitals who use Wellpartner, a violation of New York antitrust law. The absence of a contract means that hospitals and clinics who receive 340B subsidies could not collect the funds which were rightfully theirs and comply with Wellpartner and CVS’ scheme.
Through her lawsuit, Attorney General James is seeking injunctive relief, equitable monetary relief for the lost revenue and additional costs safety net health care providers were forced to incur, and civil penalties for CVS’s unfair and illegal business practices. In addition, Attorney General James seeks to require CVS to inform all safety net health care providers that they are not required to exclusively use Wellpartner.
“CVS’s actions are a clear example of a large corporation using its clout and power to take advantage of institutions and vulnerable New Yorkers, but my office will not allow it. We are taking action to stop CVS’s harmful practices and recoup critical funds to improve health care for our communities. When powerful corporations undermine the health and wellbeing of vulnerable communities in New York, they can expect to hear from my office.”
The lawsuit alleges that CVS’s actions undermined the goal of the 340B program and hurt the financial condition of safety net health care providers. CVS required health care providers to transition at a significant cost to Wellpartner if the hospitals wanted to obtain 340B revenues from prescriptions filled at CVS pharmacies. Many hospitals switched to Wellpartner for all their 340B needs because it was not practical or economical to pay for two TPAs. In addition, CVS knew that the 340B program rules do not allow hospitals to steer patients away from certain pharmacies, so health care providers had no choice in practice — if they didn’t go along with CVS’s scheme, they simply couldn’t collect 340B savings for patients who choose to go to CVS pharmacies.
The litigation is being handled on behalf of New York by Assistant Attorneys General Jeremy Kasha and Olga Kogan and Senior Enforcement Counsel Bryan Bloom of the Antitrust Bureau, under the supervision of Deputy Bureau Chief Amy McFarlane and Bureau Chief Elinor Hoffmann. The Antitrust Bureau is a part of the Division for Economic Justice, which is led by Chief Deputy Attorney General Chris D’Angelo and overseen by First Deputy Attorney General Jennifer Levy.
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