CVS Accused of Illegally Inflating Prescription Drug Prices
The pharmacy company also updates investors on various subpoenas, legal settlements, and investigative demands.
August 4, 2021
CVS Health (CVS), a pharmacy, is in the crosshairs of another state Attorney General. The company’s pharmacy benefit manager (PBM) practices have been under the legal microscope for some time; it has disclosed receiving multiple civil investigative demands (CIDs) from several AGs. But new language in CVS’s latest quarterly filing suggests new legal problems for the company’s PBM business.

In the previous quarter, CVS disclosed this:

“The Company is facing multiple lawsuits, including several putative class actions, regarding drug pricing and its rebate arrangements with drug manufacturers.”

In its latest 10-Q, CVS added language indicating another AG is now targeting the company:

“The Company is facing multiple lawsuits, including by a State Attorney General, governmental subdivisions and several putative class actions, regarding drug pricing and its rebate arrangements with drug manufacturers.”

We believe the unnamed Attorney General CVS is referring to is Ohio’s Dave Yoast, who recently targeted Centene (CNC) for similar alleged activity including illegally using its PBM to intentionally inflate the cost of prescription drugs.

Separately, regarding CVS’s involvement in opiate litigation, the company revealed two settlements had been reached in the state of New York:

“In June 2021, prior to the start of the New York State Court bellwether trial, the Company reached a settlement with Nassau and Suffolk Counties for an immaterial amount.

The company remains a defendant in other state-led opioid related lawsuits. It also remains a target of the Department of Justice (DOJ) with regard to prescription opioids. In the latest filing, CVS included new language indicating it is currently providing “documents and information” in response to a previously disclosed administrative subpoena.

Lastly, CVS revealed the Washington State AG may have had a change of heart, at least temporarily, with regard to allegations the company had committed Medicare fraud by submitting false claims and pocketing the ill-gotten gains. In the latest quarterly report, CVS revealed:

“In June 2021, the government withdrew this CID and indicated that no further action is required from the Company with respect to the April 2020 CID.”

In categorizing the above CID by the month in which it was received, investors should assume there are others.
Related: UNH, ANTM, CI, WBA, MCK, ABC, CAH, AMZN, WMT
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