Two of Michigan’s biggest health systems, University of Michigan Hospitals and Henry Ford Health, have hauled CVS Health into federal court, accusing the pharmacy giant and several affiliates of siphoning millions from the federal 340B drug discount program that is meant to support low-income patients. The complaints, filed in May and mid-July, allege that CVS used its vertically integrated pharmacy benefit manager and specialty pharmacy operations to retroactively reclassify claims and keep reimbursement “spread” that hospitals say should have gone to them. University of Michigan’s complaint estimates roughly $66 million in lost 340B revenue, and Henry Ford says it lost more than $29 million.
University of Michigan filed its case May 18 in the U.S. District Court for the Eastern District of Michigan, according to the University of Michigan complaint. Henry Ford’s complaint was filed July 16, and the health system’s docket appears on Justia; the new filing was reported by Crain's Detroit Business. Both suits name CVS Health, CaremarkPCS, CVS Specialty and WellPartner as defendants and allege RICO and related state claims.
How Hospitals Say CVS Captured 340B Savings
Plaintiffs and their lawyers say the alleged mechanism involves retroactive identification of 340B eligible specialty claims weeks after a prescription is filled. The process, as described in Healthcare Dive, is said to let CVS entities keep the difference between the insurer reimbursement and the reduced remittance passed on to the hospital.
The University of Michigan complaint lays out examples to illustrate the gap in payments. In one entry, the complaint shows a Stelara fill that generated $24,979 for the university’s specialty pharmacy but was processed at $18,455 through CVS Specialty, a delta of about $6,523 that plaintiffs say reflects diverted 340B revenue (University of Michigan complaint).
What Hospitals Want And How CVS Is Pushing Back
The hospitals are asking courts to order a full accounting, disgorgement of funds the lawsuits say were improperly retained, and injunctive relief to stop the disputed payment process, according to the Frier Levitt press release. CVS pushed back in statements reported by Becker’s, with a company spokesperson calling Henry Ford’s filings riddled with erroneous accusations and saying CVS will “vigorously defend” itself. Industry coverage also notes that CVS has generally declined broader comment while the litigation is active (Healthcare Dive).
Why Michigan Patients Are Watching
The 340B program was created so hospitals and clinics that serve large numbers of low-income patients can purchase outpatient drugs at steep discounts and use savings to fund care and assistance programs, per the Health Resources and Services Administration. If the hospitals’ allegations are proven, plaintiffs say the diverted money could shrink programs that subsidize care for uninsured Michiganders and reduce support for specialty services relied on by vulnerable patients.
Legal Implications
Both the University of Michigan and Henry Ford suits assert racketeering claims under 18 U.S.C. § 1962, which can open broad discovery into contracting and remittance practices. Legal observers note the filings add to similar suits filed earlier this year and could increase congressional and regulatory scrutiny of PBM vertical integration and specialty pharmacy arrangements (HealthLeaders).
What to watch next: the University of Michigan docket shows defendants were given an answer today, and Henry Ford’s complaint was filed July 16 with summonses recently issued. Court watchers expect motions to dismiss, discovery fights over remittance and audit data, and possible follow-on litigation as other hospitals and policymakers parse the complaints, according to Justia.
