340B lawsuits against CVS allege $250M in underpaid hospital reimbursement

CVS Health’s pharmacy benefit manager (PBM) under-reimbursed three health systems by almost $250 million over five years in connection with the 340B Drug Pricing Program, according to new lawsuits.

Filed in three separate federal courts, the complaints describe how CVS Health and its subsidiaries retained a large share of the savings generated through the 340B program instead of transmitting the funds to hospitals.

Mount Sinai Health System in New York City, the University of Kansas Hospital Authority, and the University of Michigan Hospitals and Health Centers brought the lawsuits. In addition to triple damages under the RICO Act, the plaintiffs seek an injunction that would stop CVS from continuing the business practices at issue.

“Behind the scenes, CVS systematically diverted funds Congress specifically designated to help safety-net hospitals care for the most vulnerable Americans — and pocketed them as corporate profit,” Jonathan Levitt, partner at the firm of Frier Levitt, which is representing each of the plaintiffs, stated in a news release. 

CVS Health has not commented on the cases, which take 340B litigation beyond the typical disputes between providers and drug manufacturers and into the realm of vertically integrated PBMs.

What the CVS 340B lawsuits allege

Underlying the specific claims of breach of contract, fraud and racketeering is the concern that CVS Health’s business structure allows the company to wield “near limitless power and influence in the prescription drug market and the adjudication of 340B-eligible claims,” the Mount Sinai complaint states.

As described in the filings, the plaintiff health systems relied on CVS’s contract pharmacies because of network restrictions implemented by the company’s insurance (Aetna) and PBM (CVS Caremark) arms. Patients lacked the option to fill prescriptions at the hospitals’ pharmacies.

For 340B drugs, CVS pharmacies were supposed to remit the insurance payments back to hospitals, keeping only dispensing and claim-processing fees. But because the company’s portfolio includes the Caremark PBM; a vast network of pharmacies under the brand names CVS Specialty and Caremark LLC; and WellPartner, a 340B third-party administrator (TPA), CVS allegedly had the means to manipulate payment rates for 340B claims after processing them.

After the insurer or patient paid full price, CVS internally decreased the amount paid to hospitals on 340B claims and pocketed the spread, according to the complaints.

“The complaints allege that several weeks after the point of sale, when WellPartner flags the claim as 340B-eligible, CaremarkPCS secretly pays CVS Specialty an artificially reduced reimbursement rate,” according to the Frier Levitt news release. “WellPartner then falsely presented to the Covered Entity Hospitals that artificially reduced amount as the full reimbursement for the 340B specialty drug claim.”

In the Mount Sinai case, the company is said to have kept 56% of the 340B savings at issue, “comprised of the dispensing fee, TPA fee, and 340B spread retained through CVS’s artificially deflated reimbursement scheme.”

Alleged losses affect 340B savings and uncompensated care funding

Since 2020, CVS’s business model allegedly resulted in $121 million in 340B-related losses at Mount Sinai, $61 million at the University of Kansas and $66 million at the University of Michigan. One impact on the health systems was less available funding to provide uncompensated care. In addition, financial harm to patients may stem from higher copayments linked to the higher prices paid at the point of sale.

CVS also is said to have stymied auditing procedures that could have revealed whether the PBM inappropriately retained funds. The company went as far as to terminate the hospitals from contract pharmacy agreements in retaliation for efforts to investigate the matter, the plaintiffs say.

The court filings include comparisons illustrating that a given drug as covered by the same insurer brought higher reimbursement when it was filled at a hospital pharmacy as opposed to a CVS pharmacy.

For example, the gap in a paid claim for the drug Stelara, depending on whether the pharmacy was hospital-based or CVS-owned, was $7,723, according to the University of Kansas’s complaint, $7,206 at Mount Sinai and more than $6,523 as alleged by the University of Michigan.

The Michigan lawsuit also alleges that a state law was violated. The complaint cites the state’s 340B pricing law, which requires 340B claims to be reimbursed equitably with other claims.

Prior concerns about PBMs and 340B

Questions about how PBMs interact with 340B may represent a rare area of accord between providers and drug manufacturers. In 2024, the Pharmaceutical Research and Manufacturers of America (PhRMA) published an analysis about how PBMs “use the 340B program” as a profit driver.

A key Senate committee has raised some of the same issues about CVS Health that are seen in the new lawsuits. In January 2024, Sen. Bill Cassidy (R-La.), then the ranking member of the Health, Education, Labor and Pensions (HELP) Committee, wrote to the company seeking information about its 340B participation and relationship with participating providers.

“CVS Health’s oversized role in the 340B Program allows it to realize significant profits,” Cassidy wrote.

The new lawsuits echo that conclusion, stating that the alleged scheme “is consistent with publicly available information that CVS is profiting handsomely from the 340B Program.”

In the House, wide-ranging 340B legislation introduced in 2025 includes language to prevent PBMs from implementing the type of contracting and internal data-sharing practices that are at issue in the lawsuits. Considered a longshot to pass Congress, the bill also has drawn concern from hospital advocates because of proposed constraints such as limits on 340B participation by urban disproportionate share hospitals.