Leading retail pharmacy chain, CVS, is being implicated in an overcharging scheme which used “clawbacks” to jack up prices for supposedly inexpensive generic drugs. According to the plaintiff, Megan Schultz, some of the “affected” prescriptions include lithium, naproxen, and zolpidem. Lawyers of Schultz have said that the public remains unaware of this repulsive behavior, in which pharmacy chains charge more for customers who use their insurance to pay for generic prescriptions. The class-action lawsuit also included Walgreens in its description, citing the company’s apparent lack of ethics as it blatantly overcharged customers through industry middlemen.
The fraudulent system took advantage of pharmacy benefit managers (PBMs), who act as the intermediaries between pharmacies and insurance companies. The main role of a PBM is to negotiate prices between both parties so that the customer would have the lowest out-of-pocket cost while ensuring that the insurance company and pharmacy are also able to gain profit. Supposedly, the PBMs were incentivized by CVS to get more clients by receiving a portion of the company’s sales. Most consumers are unaware of this relationship — contracts existing between CVS and PBMs are highly confidential. So while we remain oblivious to this collusion, the “consumer pays the amount negotiated between PBM and CVS even if that amount exceeds the price of the drug without insurance.”
Schultz uses her own experience as evidence. She claims that she paid $165.68 for a prescription last July that should have normally cost just $92, if she paid for it without insurance. As written in the complaint, “CVS never told her that paying in cash would allow her to pay 45 percent less for the drug; instead, CVS remained silent and took her money — knowing full well that no reasonable consumer would make such a choice.”
These are known as “clawback” payments. CVS can charge customers a price of their choosing, collecting co-pays that far exceed recommended prices which they can then remit back to the PBM. (Related: CVS pharmacies ‘bribing’ customers to abandon medical privacy protections.)
CVS has fired back against the complaint, saying in a statement that these allegations are “built on a false premise and are completely without merit.”
They further explained, “co-pays for prescription medications are determined by a patient’s prescription coverage plan, not by the pharmacy. Pharmacies collect the co-pays that are set by the coverage plans…our PBM CVS Caremark does not engage in the practice of co-pay clawbacks. CVS has not overcharged patients for prescription co-pays, and we will vigorously defend against these baseless allegations.”
A former policy director of the Federal Trade Commission who is now an antitrust lawyer, David Balto, remains skeptical. He told NBC News that the PBM market is a “thinly regulated” industry and that without proper direction could very easily run amok.
The attempt to lower drug prices has been an area of contention for both political parties. President Trump met with top pharmaceutical executives in January and asked them push their costs down. He told them that “we have no choice.”
The 50-page lawsuit comes at an extremely tense time, as top generic drug manufacturers struggle to keep afloat. Teva Pharmaceutical Industries recently took a $6.1 billion impairment charge for the second quarter.
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