Several States Join Lawsuit Against CVS Health Over Overcharged Medicaid Programs

Attorneys general from four states have initiated legal action against CVS Health and its retail pharmacies, alleging the submission of false and fraudulent applications to state Medicaid programs.

Connecticut, Oklahoma, Indiana and Massachusetts assert that CVS has failed to provide the typical and standard pricing accessible to other payers for prescription medication claims to Medicaid since as far back as 2016. This led to state Medicaid programs overcompensating CVS relative to other health plans.

The complaint states that CVS conducted discount card campaigns and transactions using MedImpact’s ScriptSave, which acted as a third-party operator and vendor.

The lawsuit stated that CVS collaborated tactically with ScriptSave to establish pricing, asserting that it was CVS—not ScriptSave—that ultimately provided the discounted rates to the public.

The objective of disclosing pricing, as detailed in the suit, is to ensure that Medicaid does not pay expenses exceeding those of other health payers. Tong’s office said that an examination revealed prescription medications for which the state Medicaid program incurred more costs than the consumers using discount cards. This is a violation of state law, which mandates that Medicaid be charged at the lowest price available under discount programs.

For its part, CVS flat-out replied that the lawsuit wasn’t credible, adding that the firm has already faced and gotten the better of previous similar lawsuits. A CVS spokesperson noted that none of the four states participating in the lawsuit had ever provided directives to pharmacies suggesting that prices from third-party discount cards should be considered their usual & customary rates. 

In 2020, Blue Cross insurers initiated legal action against CVS for offering reduced rates on generic pharmaceuticals via consumer discount programs while simultaneously requesting reimbursement from health plans at increased costs for the same prescriptions.

The Health Savings Pass, CVS’s discounted cash program, was introduced in November 2008.

Connecticut joined the other 3 states relatively later, as announced by Attorney General William Tong. The lawsuit was initiated in the Washington D.C. court district according to the whistleblower clauses of the federal False Claims Act. Tong collaborated with the attorneys general from the other three states in the lawsuit to get triple damages, compensation, and sanctions for the fraud. 

In a press release, Tong emphasized that Connecticut’s regulations are designed to promote fairness and transparency in drug pricing within the Medicaid program. He stated that CVS was aware of these laws but failed to adhere to them, and reaffirmed the state’s commitment to safeguarding the integrity of publicly funded healthcare initiatives.