CVS Health Sued Over Alleged Scheme to Siphon 340B Drug Program Savings

Three major hospital systems filed federal lawsuits on May 21, 2026, against CVS Health Corporation and several of its affiliates, including CaremarkPCS Health, Caremark, CVS Specialty, and WellPartner, alleging the company orchestrated a covert scheme to divert approximately $250 million in savings generated through the federal 340B Drug Pricing Program between 2020 and 2025. The complaints were filed by Frier Levitt, a nationally recognized health care law firm with offices in New York and New Jersey.¹

“Uncovering the spread between what CVS received and what it reported to the hospitals generally requires a sophisticated review of data and expertise in the drug space,” said Jonathan Levitt, founding partner at Frier Levitt, in a written comment to The American Journal of Managed Care^® (AJMC^®). “But hospitals expect the PBM [pharmacy benefit manager] and their specialty pharmacy partner to report accurately, and that is exactly what CVS allegedly exploited."

“CVS Health’s mission statement commits the company to lowering the cost of care and improving the health and well-being of those it serves,” said Levitt in a statement. “What our Complaints allege is the opposite: that behind the scenes, CVS systematically diverted funds Congress specifically designated to help safety-net hospitals care for the most vulnerable Americans—and pocketed them as corporate profit. The hospitals are seeking full accountability and recovery of the funds that should have gone to expanding access to care for underserved communities.”

The plaintiffs include the University of Michigan Hospitals and Health Centers, the University of Kansas Hospital Authority, Mount Sinai Hospital, Saint Luke’s Roosevelt Hospital, and Mount Sinai Beth Israel.

Congress created the 340B Drug Pricing Program in 1992 to shield safety-net hospitals from rising drug prices and help them care for low-income patients and communities. Participating hospitals, often called "covered entities," are entitled to purchase outpatient drugs at significantly reduced prices, with the resulting savings intended to fund uncompensated care, specialty services, and patient assistance programs for uninsured and underserved populations.²

The scale of the program is substantial. Health care facilities participating in the program spent $43.9 billion on 340B drugs in 2021, with cancer drugs constituting 41% of 340B purchases.³ The program has become a financial lifeline for safety-net institutions operating on razor-thin margins.

What the Hospitals Allege

According to the complaints, the hospitals entered into contractual agreements requiring all third-party payments for successfully adjudicated 340B specialty drug claims to be passed through to them, minus CVS Specialty dispensing fees and WellPartner administrative fees.¹ The lawsuits allege CVS systematically violated those agreements.

Because 340B eligibility often cannot be confirmed at the point of sale, specialty drug claims are initially processed at standard national network reimbursement rates. The complaints allege that several weeks after the point of sale, when WellPartner identifies a claim as 340B-eligible, CaremarkPCS secretly pays CVS Specialty an artificially reduced reimbursement rate. WellPartner then presented that reduced amount to the hospitals as if it were the full reimbursement, concealing the earlier, higher-rate claim and retaining the difference, known as the "spread," as pure corporate profit.

"Concealment changes the legal calculus significantly,” Levitt told AJMC. “A breach of contract claim addresses the failure to perform a contractual obligation. But when a party doesn't just fail to perform, when it actively hides information to prevent the other side from discovering the breach, you're in different territory. Our Complaints allege conduct that goes well beyond a contractual dispute. The deliberate misrepresentation of reimbursement amounts, the suppression of the original claims data, the systematic nature of the scheme over 5 years. That matters enormously for damages; these claims can support remedies that a straight breach of contract claim does not, including in some circumstances punitive damages. CVS didn't just allegedly breach these contracts. We allege they went to significant lengths to make sure our clients never found out."

What's at Stake

If the allegations are proven, the implications extend well beyond the $250 million sought. The lawsuits raise fundamental questions about transparency and accountability in specialty pharmacy contracting, particularly in arrangements where the same corporate family controls the pharmacy benefit manager, the specialty pharmacy, and the claims adjudication platform. The cases are proceeding in federal court.

References

1. Hospitals sue CVS Health for hundreds of millions in connection with secret scheme to divert funds intended for indigent care. Friar Levitt. News release. May 21, 2026. Accessed May 21, 2026. https://www.frierlevitt.com/news/hospitals-sue-cvs-health-340b-drug-program-diversion-lawsuit/

2. The 340B Drug Pricing Program. AAMC. Accessed May 21, 2026. https://www.aamc.org/news/340b-drug-pricing-program

3. McCrear S. 340B program spending increases due to market trends and eligibility expansion. AJMC. September 11, 2025. Accessed May 21, 2026. https://www.ajmc.com/view/340b-program-spending-increases-due-to-market-trends-and-eligibility-expansion