Whistleblower lawsuit reveals conduct denying Medicare patients access to low-cost generics

According to a lawsuit brought by a Baron & Budd P.C. client, in 2015, CVS Caremark, a pharmacy benefit manager (PBM) owned by CVS Health, together with SilverScript, another company owned by CVS Health that has long provided prescription services to Medicare Part D beneficiaries across the United States, quietly began removing some less expensive generic versions of medicines from its lists of covered medications, later claiming, falsely, that the generic versions were more costly for consumers than brand-name prescriptions. CVS Health worked in concert with its subsidiaries SilverScript, CVS Caremark and its chain of CVS pharmacies to develop a carefully coordinated effort to deprive patients of their rightful access to cheaper versions of the medications they needed.

As reported by STAT News, “the scheme involved arrangements with drug companies that allegedly sought to block generic competition for more than a dozen widely prescribed, brand-name medicines. Some of the drugs in question are used to treat hepatitis C, multiple sclerosis, dementia, schizophrenia, ulcerative colitis, asthma and high eye blood pressure, among other conditions…”

The complaint contends the ruse played out successfully for years, allowing CVS Health to provide drug makers with a way to block Medicare Part D beneficiaries’ access to less costly generic versions of the medicines they needed. Not only did the plan cost elderly and disabled consumers more out-of-pocket expenses to pay for their drugs, it cost taxpayers too, since the government was forced to pay more for the brand-name medicines provided to beneficiaries. In the process of defrauding taxpayers and the government, it is alleged that CVS Health also violated the terms of a 2012 consent decree it entered into with the Federal Trade Commission by engaging in activities which deceived Medicare Part D beneficiaries.

To make matters even worse for consumers who went to the trouble to gain access to a generic version of the medication they needed after CVS Health and its affiliates removed it from approved “formulary” lists, the lawsuit alleges CVS Health saw to it that patients’ formulary exception requests were denied for two very expensive Gilead drugs, Harvoni and Epclusa, used to treat the life-threatening condition, hepatitis C. The complaint details that this practice resulted in many patients not being able to continue treatment for their medical conditions because they simply could not afford their medicines, all because CVS Health had intentionally manipulated formulary access and inventory at its pharmacies.

And it wasn’t only the CVS Health subsidiaries SilverScript and CVS Caremark that acted to deprive customers of the ability to access cheaper generic versions of the drugs prescribed to them. According to the complaint, top management at CVS Health also instructed its pharmacies not to stock certain generic prescriptions (Harvoni, Epclusa, Ventolin HFA and Advair Diskus) on their shelves. Because 35 percent of all prescriptions filled in 2019 across the United States were filled at a CVS pharmacy, it is easy to see how CVS Health’s deception widely diminished public access to more affordable prescription medicines.

CVS Health Took Decisive Steps to Evade Detection

In a clever maneuver to avoid getting caught in its deceptive pricing scheme, the Baron & Budd case alleges CVS Health went so far as to target the denial of lower-cost generic drugs to Part D beneficiaries who receive low-income subsidies. CVS Health strategized that because the U.S. government was subsidizing most or all of the cost of medicines for low-income consumers, those consumers would be less likely to request a generic equivalent in the first place or to complain when a generic equivalent was not available since they were not personally paying as much out-of-pocket for the full-priced brand medicine. As the lawsuit alleges, even if the difference in price between the generic and brand-name versions of a medicine was many thousands of dollars, the out-of-pocket costs for these patients would differ little, so subsidized consumers would have far less incentive to complain when told that a lower-cost generic was not available, if they asked at all.

The Courage to Step Forward

Fortunately, for the good of all Americans, a former CVS Health senior director for Part D operations chose to report the company’s malfeasance to authorities after her complaints to her supervisors about the illegality of the company’s practices were ignored.

Courageous employees and former employees who come forward as whistleblowers are a critical tool in helping to identify fraudulent practices and stop schemes against the government and taxpayers. When whistleblowers come forward with evidence of fraud, they can receive a portion of any monetary recovery. For more information about pharmacy benefit manager fraud and becoming a whistleblower, visit our page about Why You Should Be A Whistleblower.

A Lawsuit is Filed

On March 28, 2022, a whistleblower who was a former CVS Health employee, represented by the qui tam attorneys at Baron & Budd, P.C., filed a 680-page amended complaint in the Eastern District of Pennsylvania, accusing CVS Health and its affiliates of discouraging consumer access to generic medicines by, among other methods, coaching call center representatives on how to counter patients’ complaints when told CVS Health did not offer less costly generics for the medicines they needed. These employees were also instructed to tell Part D beneficiaries that choosing a brand-name drug would be less costly than the generic version, which was an “outright falsehood,” according to the lawsuit.

The whistleblower lawsuit alleges that CVS Health and its subsidiaries devised an “intentionally fraudulent” scheme to prevent Medicare Part D beneficiaries from accessing less costly, equivalent versions of numerous generic prescription drugs in favor of much costlier brand-name drugs and, in doing so, accrued “astonishing profits for itself” while passing the increased costs onto Part D beneficiaries and taxpayers.

The complaint notes that the deception perpetrated on consumers by CVS Health disproportionately affects elderly and disabled SilverScript Part D beneficiaries who, in some cases, may have been forced to ration or abandon their medications altogether because they simply could not afford the cost of brand-name prescriptions.

The Federal Trade Commission Investigation

The FTC issued a new policy statement on June 7, 2022, alerting drugmakers, pharmacies and pharmacy benefit managers that it had launched an investigation into the structure of pharmacy benefit managers and would be scrutinizing rebate schemes and fees to make sure the payments are not violating antitrust and consumer protection laws. The agency said it will “ramp up enforcement against any illegal bribes and rebate schemes that block patients’ access to competing lower-cost drugs.”

The FTC also said it plans to monitor lawsuits such as this one and will file its own legal briefs and offer assistance in analyzing company behavior that results in drug price increases. FTC Chair Lina Khan said in a statement that “protecting Americans from unlawful business practices that are raising drug prices is a top priority for the Commission.”

“Whistleblowers are essential in fighting fraud against the government and taxpayers,” said Baron & Budd Shareholder Scott Simmer. “Part D Plan Sponsors, as well as pharmacy chains and pharmacy benefit managers, need to be held accountable when they defraud government programs and waste taxpayer dollars in an effort to create enormous profits for themselves.”