Judge Rules in Favor of Unions, Denying CVS’s Motion to Dismiss Fraud Lawsuit for Inflating Generic Drug Charges

Class action claims CVS charged third-party payors more than three or four times customary pricesJudge Rules in Favor of Unions, Denying CVS’s Motion to Dismiss Fraud Lawsuit for Inflating Generic Drug Charges

PROVIDENCE, R.I. – A federal judge upheld a class-action lawsuit brought by third-party payors (TPPs) against CVS Health Corporation, denying CVS’s motion to dismiss the suit that accuses it of overcharging TPPs by up to four times the customary amount for generic prescription drugs, according to Hagens Berman.
In Judge William E. Smith’s opinion and order issued through the U.S. District Court for the District of Rhode Island on Nov. 1, 2016, he allowed consumer protection and unjust enrichment claims to proceed, stating that “Plaintiffs have sufficiently alleged a fraudulent scheme.”
“Since it first started this scheme in 2008, CVS has gotten away with overcharging hundreds of thousands of third-party payors including unions, employers, insurers and others who pay for prescription benefits,” said Steve Berman, managing partner of Hagens Berman and attorney representing the TPPs in the lawsuit. “We’re pleased that today Judge Smith saw through CVS’s smoke and mirrors – that its HSP program is a sham designed to conceal its fraudulent dealings.”
The suit filed earlier this year states that for years, CVS knowingly submitted false and artificially inflated prices for generic drugs to TPPs, seeking to hide the fraudulent, over-instated charges via its Health Savings Pass (HSP) program, which the lawsuit dubs “the vehicle for its fraud.”
According to the lawsuit, “big-box” retailers with pharmacy departments, such as Wal-Mart and Target, began offering hundreds of generic prescription drugs at significantly reduced prices in 2006. In November 2008, CVS responded by introducing its HSP program, which provided special pricing for approximately 400 generic prescription medications to individuals who paid an annual membership fee.
According to the complaint, CVS commonly submits electronic claims for payment to TPPs when it fills prescriptions, and is required to state accurately its usual and customary price for every dispensing event, which is generally defined as the cash price to the general public for the same drug. The amount collected by CVS may not exceed CVS’s usual and customary price.
CVS intended that the HSP program would hide its true usual and customary prices from TPPs to reap what the suit calls “ill-gotten gains.”
By submitting false and inflated usual and customary prices to third-party payors, CVS knowingly and wrongfully overcharged TPPs amounts that exceeded the HSP drug prices available to the general public for the same drugs, according to the suit, in many cases by more than three or four times the usual and customary price from November 2008 to the present.


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