New York sues CVS Health for violating antitrust laws

New York Attorney General Letitia James sued CVS Health, alleging that the company violated antitrust laws by requiring safety net hospitals to exclusively use one of its subsidiaries when filling 340B-eligible prescriptions, in today’s bite-sized hospital and industry news from the District of Columbia, New York, and North Carolina.

  • District of Columbia: HHSOffice of Inspector General (OIG) last week reported that CMS has failed to recover hundreds of millions of dollars in Medicare overpayments. In an audit, OIG found that CMS has recovered only $272 million out of $498 million in overpayments, which were first identified in 2018. In addition, proper documentation was only available for $120 million of the recovered funds. OIG recommended CMS recover the remaining $226 million, standardize its transaction records, and provide guidance to contractors about how to submit financial information to the agency. “The combination of a substantial balance of uncollected overpayments, inadequate policies and procedures, and unimplemented recommendations increases the risk that CMS will not collect millions of dollars owed to the Medicare trust funds,” OIG said. However, a CMS spokesperson said the numbers in OIG’s report are out of date, adding that the agency has collected 75% of the total overpayments and continues to recover more. (Hartnett, Modern Healthcare, 7/28)
  • New York: New York Attorney General Letitia James on Thursday filed a lawsuit against CVS Health, alleging that the company violated antitrust laws and negatively impacted the state’s safety net hospitals and clinics. In the lawsuit, James accused CVS of an “ongoing anticompetitive scheme” by requiring safety net hospitals and other providers in the federal 340B Drug Pricing Program to purchase administrative services from Wellpartner, a CVS-owned subsidiary, if they wanted to process 340B-eligible prescriptions through CVS pharmacies. According to The Hill, this requirement was set in 2017 when CVS first purchased Wellpartner. “CVS’s actions undermine the aim of the 340B Program and hurt the financial condition of safety net healthcare providers,” the suit argued. “With its illegal tie, CVS has harmed the competitive process and has caused substantial harm to the market for the provision of TPA Services in New York, foreclosing the ability of other TPA providers to compete on the merits.” In response to the lawsuit, CVS spokesperson Philip Blando said the allegations are “without merit” and that the company would “vigorously” defend itself against the claims in the lawsuit. (Choi, The Hill, 7/28; Young, Politico Pro [subscription required], 7/28; Jacob, Wall Street Journal, 7/28; Pierson/Mishra, Reuters, 7/28)
  • North Carolina: Labcorp on Thursday announced plans to spin off a new stand-alone company focusing on clinical development. According to the Wall Street Journal, the new business will manage Phase I-IV clinical trials and provide other services to biotechnology and pharmaceutical companies. “In terms of the potential for business development, the opportunities out there are greater than they have ever been before,” said Labcorp CEO Adam Schechter, noting that new possibilities in virtual and hybrid trials could be an area of growth. Going forward, Labcorp plans to continue its main diagnostic testing business, as well as certain parts of its drug development business that focus on early-stage development and central laboratory work. Schechter will continue as CEO of Labcorp, but leadership of the new clinical development company will be announced in the future. (Lombardo, Wall Street Journal, 7/28)

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