CVS Illegally ‘Ties’ Hospital Participation in Fed. Drug Pricing Program to Business with Wellpartner, Class Action Alleges

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A proposed class action alleges CVS has unlawfully forced certain "safety net" healthcare providers to purchase administrative services from subsidiary Wellpartner at “supracompetitive prices.”

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The 33-page antitrust lawsuit was filed on April 17 by Brandywine Hospital, a Pennsylvania-based healthcare provider that served a high number of patients who were either uninsured or covered by Medicare or Medicaid until its “devasting” closure in January 2022, an event the case says created a “health care desert” in Chester County. 

Although Brandywine Hospital was once able to purchase outpatient drugs from manufacturers at significantly discounted prices through the federal 340B Drug Pricing Program, the hospital suffered substantial losses when, in 2018, CVS told healthcare providers participating in the program that they must contract with Wellpartner in order to process 340B-eligible prescriptions filled at CVS pharmacies, the suit claims.

According to the complaint, Congress created the 340B Program in 1992 so that qualifying hospitals and clinics that treat low-income and uninsured patients, known as “safety net” providers, can buy pharmaceuticals from manufacturers at a discount and dispense those medications through their own in-house pharmacy or outside pharmacies, like CVS. Safety net providers, also called covered entities, generally pay these outside pharmacies an extra fee for agreeing to this contractual relationship, the case adds.

Per the suit, covered entities only receive this discount, or “340B savings,” if a patient fills a prescription at an in-house or contract pharmacy. However, the program strictly prohibits healthcare providers from steering patients toward or away from specific pharmacies, the filing states.

“Covered Entities rely on 340B Savings to fund patient care services to underserved and vulnerable populations,” the suit notes. “340B Savings are essential to the hospitals and healthcare providers that participate in the 340B Program and their efforts to maintain and expand healthcare access for disadvantaged populations and communities.”

As the case tells it, covered entities typically retain a third-party administrator (TPA) that uses specialized technology to help ensure that the provider complies with various 340B Program requirements. Before CVS began tying access to the CVS contract pharmacy market to covered entities’ agreement to hire Wellpartner, the suit says, safety net providers could consider factors such as quality, price and audit performance before choosing to contract with a particular TPA.

“When CVS is the Contract Pharmacy and requires the Covered Entity to use Wellpartner as the TPA, the Covered Entity cannot consider such factors or bargain for a competitive price,” the filing says.

The suit also notes that CVS is the largest retail pharmacy chain in the country, so safety nets have no choice but to contract with Wellpartner or lose substantial 340B savings.

Although some covered entities converted all their TPA business to Wellpartner in response to CVS’s “anticompetitive tie,” others began contracting with Wellpartner in addition to their original TPA, even though working with multiple TPAs is not an ideal arrangement, the complaint claims. Covered entities that hire more than one TPA incur duplicative costs and administrative burdens and are at a greater risk of noncompliance with the requirements of the 340B Program, the suit explains.

“As a result of CVS’s conduct, Plaintiff and Class members paid supracompetitive prices for Wellpartner TPA services during the Class Period,” the case summarizes. “Plaintiff and Class members also suffered non-price injury in the loss of their ability to choose a preferred TPA and the increased regulatory risk that accompanied loss of that control.”

The lawsuit looks to cover any covered entities that directly purchased TPA services from CVS and Wellpartner during the applicable statute of limitations period.

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