New York accuses CVS of diverting millions from safety-net hospitals

New York Attorney General Letitia James sued CVS on Thursday, alleging it violated antitrust laws and forced some safety-net hospitals to use a CVS-owned third-party administrator for 340B drug programs and incur millions of dollars in additional costs while it left other hospitals to miss out on critical federal funds.

The federal 340B program allows hospitals to stretch their funding by getting discounts on eligible drugs they prescribe to patients and use the savings on patient care. Most safety-net providers such as hospitals use third-party administrators to run their 340B programs, and the hospitals must keep records of the revenue they collect on prescriptions, including drugs to treat HIV/AIDS and hepatitis C. Third-partner administrators are responsible for confirming that each drug transaction is eligible for the program.

The lawsuit alleges that since 2017, CVS acquired a third-party administrator, Wellpartner, and forced the hospitals it contracted with to use the program for patients using CVS—and that CVS did not contract with hospitals that didn’t want to use Wellpartner.

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Many hospitals objected, James’ office said, because they were already had a third-party administrator. Other hospitals, upon contracting with CVS, had to use Wellpartner exclusively because they couldn’t afford to pay two third-party administrators.

The hospitals that chose not to use Wellpartner were not eligible to collect 340B payments from patients using CVS pharmacies, losing money that could’ve been reinvested in care, the lawsuit alleges. Meanwhile, hospitals that did use Wellpartner incurred millions of dollars in additional costs by hiring and training staff to understand that system.

James is seeking prohibitive action through the lawsuit, her office said, and monetary relief for the hospitals involved. In addition, James wants CVS to be required to tell safety-net hospitals and providers that they are not obligated to use Wellpartner in order to contract with CVS, her office said.

More than 4,440 safety-net providers, including Federally Qualified Health Centers, hospitals, rural referral centers, family planning clinics and the like, were enrolled in 340B programs in the state in 2021.

This story first appeared in our sister publication, Crain's New York Business.