Insurers Accuse CVS of Reaping Millions from Generic Drug Overcharges

On Thursday, four healthcare plan providers filed suit against CVS Pharmacy, Inc., for allegedly engaging in a scheme that overcharged them for prescription drugs they paid for on behalf of subscribers. The District of Rhode Island civil complaint alleges that CVS “tried to have its cake and eat it too,” by offering discounts to cash paying customers, while reporting that those customers paid more for the drugs than they actually did to obtain ill-gotten gains from third-party payors like the plaintiffs.

The complaint contends that the plaintiffs are independent licensees of the Blue Cross and Blue Shield Association, “a national association of 36 independent, community-based and locally operated Blue Cross Blue Shield Companies.” Reportedly, they provide health insurance to more than 107 million people across the country.  

The filing contends that CVS, the nation’s largest drugstore chain, offered hundreds of generic drugs at low, discounted prices through cash discount programs. It ostensibly did so for two reasons: to compete for cash customers who might gravitate towards CVS competitors, and moreover, “to obfuscate its true prices from third party payors.”

The complaint claims that because “[o]ver 75% of CVS’s revenue from its retail stores derives from pharmacy sales, and over 88% of those transactions are for generic drugs,” the plaintiffs’ overcharges reach the millions. The filing states that CVS’s scheme, known under different names at different times, and concealed from public view, went on for more than a decade. The plaintiffs allege various business torts under Rhode Island law, and in the alternative, claim under the laws of Pennsylvania, Delaware, and New York.

The plaintiffs are represented by Partridge Snow & Hahn LLP and Stein Mitchell Beato & Missner LLP.