On May 11, 2021, the District Court provided health plans a significant win when the court certified a nationwide class of health plan payers and appointed Sheet Metal Workers Local No. 20 Welfare Benefit Fund, Indiana Carpenters Welfare Fund, and Plumbers Welfare Fund, Local 130, as class representatives.
Plaintiffs, on behalf of the class, seek to hold CVS accountable for artificially inflating prices for generic prescription drugs purchased by the plans’ members and beneficiaries.
Traditionally, pharmacies report the prices paid by customers who are uninsured or otherwise paying cash for generic prescription drugs as the “Usual and Customary” (or U&C) prices for those drugs.
The U&C is used to ensure that health plans are not charged more than what is charged to patients without insurance. Put simply, health plans pay the “lower of” several prices, including U&C, for generic drugs. Reporting an honest U&C price ensures health plans pay less than consumers who pay cash.
However, as pricing for generic drugs dropped due to competition among retailers, CVS created “the HSP Pricing Enterprise” to conceal the discount prices from health plans by excluding these discount prices from the calculation of U&C prices. CVS knew that reporting these discount prices as the U&C price, the majority of health plans—over 90% of CVS’s business—would pay the lowered U&C prices, causing CVS to lose billions.
Thus, through a program called the “Health Savings Pass” (HSP), CVS charged cash customers $9.99 for the generic drugs included on the program, and health plans did not receive the benefit of the lower price because CVS reported a U&C that did not take into account the existence of its HSP program.
As a result, CVS concealed its fraud from health plans, allowing CVS to submit inflated U&C prices to payors.
Because CVS’s scheme was kept secret, plaintiffs were unaware of CVS’s allegedly unlawful conduct, and did not know that they were paying artificially inflated prices for generic prescription drugs.
The suit seeks compensatory and punitive damages under the Racketeer Influenced and Corrupt Organizations Act, certain state consumer protection acts, and the common law of unjust enrichment.