Hospital Groups File Lawsuits Against CVS for Improper Diversion of 340B Revenue

A collection of hospital groups has filed lawsuits against CVS Health Corporation, CaremarkPCS Health, Caremark, CVS Specialty, and WellPartner for their roles in the alleged diverting of 340B Drug Pricing Program funds, according to a Frier Levitt release.¹ Effectively known as spread pricing, the suits claim that CVS Health passed on critical 340B savings to its own pockets and affiliates.

“The lawsuits outline how CVS manipulated the reimbursement process for 340B specialty drug claims,” Matthew Modafferi, partner at Frier Levitt, told Drug Topics®. “Caremark adjudicated claims at the standard network reimbursement rate and later, once the claim is identified as 340B-eligible, CVS reduced the reimbursement rate to create a ‘spread’ that it keeps as pure profit.”

The plaintiffs include prominent institutions such as the University of Michigan Hospitals and Health Centers, the University of Kansas Hospital Authority, and several Mount Sinai entities. These hospital systems allege that CVS violated contractual agreements requiring all third-party payments for 340B specialty drug claims to be remitted to the covered entities, minus specific dispensing and administrative fees.^1,2

Between 2020 and 2025, this systematic diversion allegedly siphoned approximately $250 million from these 3 health systems. According to reports, these were funds that Congress intended to support care for low-income, uninsured, and underserved patients.

READ MORE: PBM Reform in New Jersey Could Bring Unprecedented Transparency

For pharmacists, the implications of this litigation touch on the very core of the 340B Drug Pricing Program, which was established in 1992 to protect safety-net providers from rising drug costs. Pharmacists are central to the 340B workflow, managing complex compliance requirements to ensure that prescriptions are tied to eligible patients, sites, and encounters.^2-4

They rely on these savings to fund critical clinical services such as medication therapy management (MTM), adherence outreach, and chronic disease programs. The program allows hospitals to stretch limited federal resources to provide comprehensive care that is often difficult to fund through traditional reimbursement models.^3,4

The specific vulnerability of specialty drugs plays a major role in this alleged scheme. Because specialty medications are significantly more expensive than other drug classes, the associated 340B savings are much larger, providing a substantial financial lifeline for hospitals operating on razor-thin margins.²

However, many pharmacy benefit managers (PBMs) mandate that plans use their own affiliated specialty pharmacies, which can create barriers for health system pharmacies attempting to bring dispensing in-house to mitigate financial risks.

The National Community Pharmacists Association notes that spread pricing, where PBMs charge payers more than they pay the pharmacy, has already caused significant financial strain on pharmacies and taxpayers alike, with some estimates suggesting that banning the practice in state Medicaid programs could save federal taxpayers $1 billion over a decade.⁵

The legal complaints suggest that CVS exploited the lack of transparency in the claims adjudication process. Because 340B eligibility is often determined weeks after the initial point of sale, CVS allegedly reported artificially reduced reimbursement rates to the hospitals while concealing the higher original network rates.^1,2

Jonathan Levitt, founding partner at Frier Levitt, noted in an exclusive interview with Drug Topics® that uncovering this “spread” required sophisticated data analytics, as CVS allegedly went to significant lengths to ensure hospitals never discovered the breach.²

This case surfaces during a time of intense pressure on the 340B landscape, with manufacturers increasingly restricting contract pharmacy access and pushing for back-end rebate models. Such shifts are seen by the American Hospital Association as illegal attempts to undermine the program’s statutory purpose.^3,4

Although federal PBM reform is frequently discussed, legal experts like Levitt and Modafferi argue that litigation remains a necessary tool for deterring behavior that exploits loopholes in existing laws.

For the pharmacy profession, protecting the integrity of these savings is about more than just numbers on a spreadsheet; it is about ensuring that the lived workflow of the 340B program continues to bridge the gap between pharmacy savings and high-quality outcomes for the nation’s most vulnerable patients.⁴

“Reform and amendments to the law are not as effective as one would think because large corporations find loopholes to exploit. Litigation is needed to change and deter behavior. As strange as it may sound, we need more litigation and conflict,” concluded Levitt. “Conflict is an inevitable and useful part of life and leads to change and generates insight. Few injustices are addressed without serious conflict.”

READ MORE: Independent Pharmacy’s Adaptability Through Reform, Closures, and Technology

REFERENCES

1. Hospitals sue CVS Health for hundreds of millions in connection with secret scheme to divert funds intended for indigent care. News Release. Frier Levitt. May 21, 2026. Accessed May 28, 2026. https://www.frierlevitt.com/news/hospitals-sue-cvs-health-340b-drug-program-diversion-lawsuit/

2. Steinzor P. CVS Health sued over alleged scheme to siphon 340B drug program savings. AJMC. May 21, 2026. Accessed May 28, 2026. https://www.ajmc.com/view/cvs-health-sued-over-alleged-scheme-to-siphon-340b-drug-program-savings

3. Fact sheet: the 340B drug pricing program. American Hospital Association. October 2025. Accessed May 28, 2026. https://www.aha.org/fact-sheets/2025-11-24-fact-sheet-340b-drug-pricing-program

4. Nowosielski B, Lanton R. FAQ: what pharmacists should know about 340B program. Drug Topics. May 28, 2026. Accessed May 28, 2026. https://www.drugtopics.com/view/what-pharmacists-should-know-340b-program

5. Spread pricing explained for pharmacists. NCPA. Accessed May 28, 2026. https://ncpa.org/spread-pricing-101