A new lawsuit filed by a California resident charges that CVS Pharmacy has been overcharging those customers who pay with an insurance plan, as opposed to those paying without assistance. While customers expect to pay more for brand names, this lawsuit seeks to prove that the customers are paying a price difference, when purchasing the same generic brands of medication. The civil suit suggests that the insurance is the only motivating factor in charging some customers more.
CVS Health Corporation Becomes the Subject of a New Lawsuit
The plaintiff in this case, Megan Schultz, is suing CVS Health Corporation, because she says she was charged $165.68 for a generic prescription that should have only cost $92. In the initial complaint, attorneys for Ms. Schultz state that CVS employees never informed her that paying cash would entitle her to a 45% discount on the drug. The complaint suggests CVS deliberately remained silent to make the extra profit, knowing that, had they informed Schultz, she would have chosen the cheaper option.
Court documents indicate that this is a common practice set up to allow PBMs, or pharmacy benefit managers, to receive a larger share of the drug profits. In exchange, the PBM will offer incentives to CVS, among them would likely be including the pharmacy as a part of the in-network program for insurers.
Of course, customers aren’t privy to any of this information. They only know what CVS employees tell them. Often, that means the insured pay more than those paying cash for the same product. CVS collects larger co-pays that usually exceed the pharmacist’s price, kicking back the additional money to the PBM as a “clawback” payment.
The specific drugs involved in Megan Schultz’s case have not been identified. However, the lawsuit does name common drugs, such as amoxicillin, Viagra, and Lexapro, as having been involved in the scheme.
CVS Fires Back, Saying Megan Schultz’s Accusations are “Completely Without Merit”
In a statement released by CVS Health Corporation, the company said the lawsuit filed by Schultz contains accusations that “are built on a false premise and are completely without merit”. The statement went on to explain that co-pays are determined by the insurance carrier for the patient and not by the pharmacy itself. While the statement does admit that the pharmacy collects the co-pay on behalf of the insurance companies, it also stated that pharmacy employees work with patients to get them the lowest possible out of pocket expense.
The corporate statement also stated that the PBM CVS Caremark does not engage in the alleged clawback practices and vowed to aggressively defend against charges to the contrary.
Meanwhile, David Balto, an antitrust lawyer and former policy director for the Federal Trade Commission, found fault with CVS and their system for pricing generic drugs. He added that the government should form a system for monitoring PBMs to ensure these clawback tactics don’t continue.
“No market is as thinly regulated as PBMs, and they’re increasingly taking advantage of it,” said Balto. “I think it’s crystal clear: Letting these entities live in a Wild West regulatory environment just leads to higher costs for consumers.”
Lowering drug costs has been a popular platform for both political parties with each side looking for a way to limit what the drug companies charge for their products. According to Megan Schultz’s complaint, there are 16 other lawsuits pending in various courts across the country, regarding clawback practices. These suits may lead to future legislation that will guarantee greater transparency in how drug companies price their products and in how pharmacies and insurance companies mark up those costs with co-pays.
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