CVS Faces Lawsuit for Allegedly Pocketing $250 Million in Drug Savings Meant for Uninsured Patients
Three major hospital systems filed federal lawsuits on May 21, 2025, against CVS Health and several of its affiliates, 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 plaintiffs are Mount Sinai, the University of Michigan Health, and the University of Kansas Health System. What they claim CVS did with that money was never supposed to be theirs to keep.
The 340B Drug Pricing Program was established by Congress in 1992 to enable hospitals and health centers serving low-income and underserved populations to purchase outpatient drugs at discounted prices. Those discounts, which can range from 25 to 50% off the list price of a drug, are meant to flow directly back to hospitals. The hospitals then use that money to fund free care, vaccines, mental health services, and medication programs for patients who cannot afford them. CVS, the lawsuits allege, made sure much of that money never arrived.
The complaints name not just CVS Health, but a web of its subsidiaries: CaremarkPCS Health, Caremark LLC, CVS Specialty, and WellPartner. The lawsuits allege CVS’ third-party administrator flags drug claims as eligible for 340B weeks after the drugs are sold, and after insurers have already reimbursed CVS at full network rates. CVS’ pharmacy benefit manager and pharmacies then allegedly lower how much hospitals are reimbursed, and keep the resulting “spread” as profit. What looked like a standard billing process was, according to the hospitals, a carefully constructed financial trap.
The Mechanics of an Alleged Billion-Dollar Bait-and-Switch
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. The lawsuits allege CVS systematically violated those agreements. In short, the contracts promised one thing, and CVS allegedly delivered something far less, without the hospitals’ knowledge.
The Michigan lawsuit offers a concrete example of how the alleged scheme worked in practice. A single Stelara prescription, a drug used to treat severe inflammatory conditions like plaque psoriasis, generated more than $24,000 for the University of Michigan’s specialty pharmacy when processed correctly. When run through CVS Specialty, that same prescription yielded only about $18,000. “The $6,523.18 reflects the ‘spread’ artificially created and pocketed by the defendants as pure profit,” according to the University of Michigan complaint. One prescription. One patient. Over $6,500 gone.
Multiply that gap across five years and thousands of patients, and the totals become staggering. Mount Sinai alone claims losses exceeding $121 million since 2020. The University of Michigan and Sparrow Hospital allege more than $66 million in losses, while the University of Kansas Hospital Authority puts its figure at nearly $62 million. The hospitals alleged that the practice is ongoing and has pulled a collective $250 million from their organizations, or about 56% of the program’s total. These figures represent care that was never delivered to the patients who needed it most.
Hospitals Say CVS Refused Audits and Punished Those Who Asked Questions
The lawsuits describe a pattern that goes beyond alleged overcharging. When hospitals grew suspicious and sought answers, CVS allegedly stonewalled them. The University of Kansas Health System attempted to resolve its dispute through the contractually mandated audit process, only to be denied. “CVS refused to permit a contractually required audit and terminated our 340B agreement,” said Dan Peters, senior vice president and general counsel for the University of Kansas Health System. Without access to records, the hospitals say, the full scale of the alleged diversion was impossible to confirm.
The retaliation, according to the Kansas complaint, went further. After the hospital raised concerns about the suspected fraud, CVS terminated its pharmacy arrangement entirely. “Defendants refused to permit an audit and terminated plaintiff from the 340B Contract Pharmacy Arrangement, in retaliation for uncovering the fraudulent scheme described herein,” the complaint states. Cutting off a hospital’s pharmacy partnership mid-dispute is, at minimum, a significant escalation. It also, the plaintiffs argue, signals consciousness of guilt.
Jonathan Levitt, founding partner at Frier Levitt, the law firm representing all three hospital systems, wrote that “hospitals expect the PBM and their specialty pharmacy partner to report accurately, and that is exactly what CVS allegedly exploited.” The complaints frame this as a structural abuse of trust, one made possible because affiliated entities allegedly worked together behind prescription drug transactions to secretly manipulate the 340B reimbursement rate while concealing their scheme. CVS, for its part, declined to address the substance of the allegations, citing ongoing litigation.
A Company With a Pattern, and Patients Who Pay the Price
This lawsuit does not arrive in isolation. Last year, a federal judge ordered CVS Health’s Caremark to pay nearly $290 million after a whistleblower accused the company of overcharging Medicare on prescription drugs. That case involved a different program and different facts, but the same core company. Two major federal cases, both centered on allegations that CVS manipulated drug pricing systems to extract money it was not entitled to keep. The pattern is difficult to dismiss.
The hospitals are asking federal courts for damages, repayment of alleged profits, and injunctive relief requiring CVS to open its records and stop the alleged conduct. Jonathan Levitt stated that CVS’ own mission commits the company to lowering the cost of care and improving the well-being of those it serves, and that what the 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 340B program was built on a simple premise: society, through its government, decided that the most vulnerable patients deserve subsidized care, and that the institutions serving them deserve the tools to provide it. If the allegations in these lawsuits hold up in court, CVS did not merely breach its contracts. It inserted itself into a public health lifeline, quietly siphoned the funds flowing through it, and then shut the door when hospitals tried to look inside. The hospitals use those savings to support uncompensated care, specialty services, and programs for low-income, uninsured, and underserved patients. Whatever CVS built with that money, it was built on someone else’s loss.