New York AG sues CVS over 340B discounts for safety net hospitals

Photo courtesy of CVS Health

New York Attorney General Letitia James has filed suit against CVS Health, saying the company violated antitrust laws and prevented safety net hospitals from receiving millions in 340B discounts.

According to the lawsuit, CVS required New York safety net hospitals and clinics to exclusively use a CVS-owned company, Wellpartner, to process and obtain federal subsidies on prescriptions filled at CVS pharmacies. This forced safety net providers to incur millions in additional costs, while CVS continued to benefit through its subsidiary, the AG claimed.

The lawsuit alleges that unfair business practices by CVS deprived safety net hospitals and clinics of federal funding that could have been used to improve and expand patient care. James is seeking to end these practices and recoup lost revenue for the impacted facilities.

"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," James said by statement.

WHAT'S THE IMPACT?

The 340B program allows safety net hospitals and clinics to purchase certain drugs at a discount from pharmaceutical companies, and then use the savings for patient care. Safety net providers in New York obtain substantial savings from the program, which the AG's office said are critical to their viability and to the health of the surrounding community. 

To realize the benefits of the 340B program, safety net hospitals and clinics must contract with the pharmacies that are used by their patients, but under CVS' practices thousands of safety net healthcare providers across the state were allegedly only allowed to use Wellpartner to process claims filled at CVS retail and specialty pharmacies.

This, according to James' office, forced them to incur millions of dollars in additional costs to hire and train staff and change their data systems to align with Wellpartner's system. CVS, for its part, said the allegations in the lawsuit were without merit, and the company plans to defend itself "vigorously."

In a statement, the company maintained that New York covered entities operate in a highly competitive retail pharmacy marketplace when choosing 340B contract pharmacies, and that the CVS offering benefits vulnerable populations by adding more retail pharmacy locations dispensing discounted prescriptions.

"In fact, CVS Health's participation in the 340B program delivered approximately $2.2 billion in savings to 340B providers in 2021, and over $200 million in New York, more than doubling the savings offered to New York Covered Entities in 2017," CVS said in the statement. "Through our efforts, we've also expanded the number of available pharmacies that participate, creating greater access to New York patients being served including underserved populations."

Safety net providers bear full legal responsibility for keeping records and may only collect 340B revenues on certain prescriptions, including patient prescriptions for medications used to treat HIV/AIDS and hepatitis C. Most safety net providers contract with a third-party administrator, or TPA, to administer their 340B programs. The TPAs confirm eligibility for each transaction and keep detailed records, as required by federal rules.

In 2017, CVS acquired a TPA, Wellpartner, and began requiring New York hospitals to use Wellpartner rather than another TPA. The Office of the Attorney General's investigation found CVS pharmacies did not contract with hospitals that do not use Wellpartner as their TPA, a violation of New York's antitrust laws. Since there was no contract, the hospitals and clinics were unable to collect 340B funds.

The OAG determined that CVS' plan was to leverage the strength of its retail pharmacy network in New York to force hospitals to use Wellpartner rather than another TPA. Many hospitals objected because they were already using other TPAs.

THE LARGER TREND

The AG is seeking injunctive relief, monetary relief for the lost revenue and additional costs incurred by providers, and civil penalties for CVS' business practices.

In addition, James seeks to require CVS to inform all safety net healthcare providers that they are not required to exclusively use Wellpartner.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com