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CVS accused of using monopoly power to exploit federal drug subsidies

A new lawsuit says the pharmacy titan's anticompetitive behavior caused safety-net hospitals to face millions of dollars in additional costs.

MANHATTAN (CN) — New York Attorney General Letitia James brought an antitrust complaint Thursday against CVS Health Corp., saying it forced hospitals that serve the state’s low-income patients to pay millions of dollars for exclusive access to discounted prescription drugs.

“While safety-net health care providers are tackling public health crises and helping underserved communities, CVS is robbing them out of millions of desperately needed funds that could improve patient care,” James said in a statement about the case. “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.”

Filed in Manhattan Supreme Court, the complaint says CVS required New York's safety-net hospitals and clinics to exclusively use the CVS subsidiary Wellpartner to process and obtain federal subsidies on prescriptions filled at CVS pharmacies through the 340B federal program.

This “exclusionary and exploitative, anticompetitive business practices” forced safety-net health care providers to incur millions in additional costs, while CVS continued to benefit through its subsidiary, according to the complaint.

“Given how prevalent CVS pharmacies are in New York, Covered Entities could lose substantial funds needed for their work as safety net health care providers — unless they also agree to contract Wellpartner for TPA Services, whether they want Wellpartner or not,” the complaint states. “The diversion of these funds into CVS’s coffers comes at the expense of the intended beneficiaries of the 340B Program — the Covered Entities — which could otherwise use such funds to improve or expand their quality of care, or for salaries of nurses and other essential staff.”

The Department of Health and Human Services uses a provision of Medicare Part B to reimburse hospitals that serve low-income and underserved communities regardless of their insurance status or ability to pay, categorized as 340B hospitals.

Because of the critical services that safety-net hospitals offer, they are reimbursed for prescription drugs at a different rate than other hospitals get. This creates a gap between drug costs at 340B hospitals and Medicare reimbursement rates. In 2018, the government attempted to eliminate that gap with a new policy creating a $1.6 billion cut in annual funding to safety-net hospitals.

The lawsuit alleges that the actions of CVS deprived such safety-net hospitals and clinics of critical federal funding that could have been used to improve and expand patient care.

James seeks to recoup lost revenue for affected hospitals and clinics, which “incurred substantial costs to transition and train personnel for Wellpartner services that were otherwise unwanted.”

The complaint was signed by Jeremy R. Kasha, from the attorney general’s antitrust bureau.

A spokesperson for CVS called the allegations “without merit,” and said they plan to “defend ourselves vigorously.”  

“We continue to be a partner to the state of New York in delivering a number of important health care solutions to the people of New York, as recently demonstrated by our sustained, robust efforts to ensure access to Covid testing and vaccinations across the state,” the CVS representative continued in a statement on Thursday afternoon.

In 2019, a federal judge in Florida refused to dismiss claims by Sentry Data Systems, a competitor to Wellpartner, which alleged that CVS violated antitrust law with its acquisition of Wellpartner two years earlier.

The last month, the Supreme Court rejected cuts to the 340B federal reimbursement program.

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