CVS Health Is Sued Over ‘Clawbacks’ of Prescription Drug Co-Pays

  • Woman says she paid $166 for medicine that actually cost $92
  • Chains worked with benefit managers on billings, suits say

CVS Health Corp. and Walgreens Boots Alliance Inc. were sued by California customers who accused the drugstore operators of charging co-payments for certain prescription drugs that exceed the cost of medicines.

CVS, the largest U.S. pharmacy chain by number of stores, overbilled consumers who used insurance to pay for some generic drugs and wrongfully hid the fact that the medicines’ cash price was cheaper, Megan Schultz said in her lawsuit. Schultz said in one case she paid $166 for a generic drug that would have cost only $92 if she’d known to pay cash. 

Deerfield, Illinois-based Walgreens, the country’s No. 2 drugstore operator, used the same clawback tactic, David Grabstald said in his suit filed Wednesday in federal court in Chicago. Grabstald contends he paid $21.80 for a generic drug that would have cost $10 if he’d known to pay the cash price.

In her suit, Shultz accused CVS of clawing back her co-pay because the chain was in cahoots with the pharmacy benefit managers who got the extra money. The practice was part of CVS’s agreements with benefit managers, such as Express Scripts Holding Co. and CVS Caremark, according to the suit filed Monday in federal court in Rhode Island. CVS is based in that state.

“CVS, motivated by profit, deliberately entered into these contracts, dedicating itself to the secret scheme that kept customers in the dark about the true price’’ of drugs they purchased, Schultz’s lawyers said in the suit, which is seeking group status.

Co-Pay Policies

CVS officials rejected Schultz’s claims and said the co-pays are determined by the benefit managers. “The allegations against us made in this proposed class-action suit are built on a false premise and are completely without merit,’’ CVS spokesman Michael DeAngelis said in an email.

Walgreens spokesman Philip Caruso said the company had no immediate comment on Grabstald’s suit.

The lawsuits follow at least 16 other cases around the U.S. targeting drugstore chains’ alleged co-pay clawback practices. The clawback occurs when patients hand over co-payments set by a pharmacy benefit manager that exceed the actual cash cost of the drug. The benefit managers pocket the difference, according to the complaints.

Cases have been filed against UnitedHealth Group Inc., which runs the benefit manager OptumRx; Cigna Corp., which contracts with OptumRx; and Humana Inc. They allege the benefit managers defrauded consumers and violated federal laws.

Most patients never realize there’s a cheaper cash price because of clauses in contracts between pharmacies and benefit managers that bar the drugstore from telling people there’s a lower-cost way to pay, according to the complaints.

CVS Falls as Drugstore Struggles Overshadow Benefits Business

Some states, such as Connecticut, have passed laws prohibiting clawbacks. Connecticut’s statute, which goes into effect in January, will allow pharmacists to tell patients it’s cheaper to pay cash for some of their drugs.

Schultz contends that CVS’s clawback agreements with benefit managers such as Express Scripts, CVS Caremark and OptumRx violate federal racketeering and insurance laws and works to artificially inflate prescription costs. DeAngelis countered in an email that “CVS Caremark does not engage in the practice of clawbacks.’’

OptumRx spokesman Andrew Krejci didn’t return a call for comment Tuesday on Schultz’s suit. Express Scripts spokeswoman Jennifer Luddy said the company believes “the allegations in the lawsuit are meritless.” None of the benefit managers were named as defendants in the cases.

“No informed consumer would pay with insurance if proper disclosure had been made that he or she could pay far less with cash,” Steve Berman, who is representing both Schultz and Grabstald, said in an email.

The cases are Megan Schultz v. CVS Health Corporation, 17-cv-359, U.S. District Court for the District of Rhode Island (Providence); and David Grabstald v. Walgreens Boots Alliance Inc., 17-5789, U.S. District Court, Northern District of Illinois (Chicago).

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— With assistance by Justin Mattingly

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