The attorney general’s office contends that CVS’ scheme forced providers to incur millions in added costs, while CVS continued to benefit through its subsidiary. CVS’ policies deprived the health care practices of critical federal funding that could have been used to improve and expand patient care, the lawsuit states.

Through her lawsuit, James is seeking to end what her office considers to be CVS’ unfair and illegal practices and to recoup lost revenue for impacted safety net hospitals and clinics that would improve health care services.

“While safety net health care providers are tackling public health crises and helping underserved communities, CVS is robbing them out of millions of desperately needed funds that could improve patient care,” James said in a statement. “CVS’s actions are a clear example of a large corporation using its clout and power to take advantage of institutions and vulnerable New Yorkers, but my office will not allow it.”

CVS did not allow New York safety net hospitals and clinics to use the company of their choice to obtain subsidies on prescriptions filled at CVS pharmacies through the 340B federal program, according to the filings. This program allows safety net hospitals and clinics to purchase certain drugs at a discount from pharmaceutical companies and use the savings for patient care.

To realize the benefits of the 340B program, safety net hospitals and clinics must contract with the pharmacies that are used by their patients. Under the CVS requirements, thousands of safety net health care providers across the state were only allowed to use Wellpartner to process claims filled at CVS retail and specialty pharmacies, forcing them to incur millions of dollars in additional costs to hire and train staff and change their data systems to align with Wellpartner’s system, according to the lawsuit.

The lawsuit alleges that New York patients were the ultimate victims of CVS’ practice, which siphoned off federal funding from safety net health care providers that could have used the funds to improve access to health care for the neediest New Yorkers — including the poor and uninsured.

More than 4,440 safety net health care providers were enrolled in the 340B program in New York as of 2021. These include Federally Qualified Health Centers, critical access hospitals, HIV/AIDS clinics, rural referral centers, sole community hospitals, black lung clinics, community health centers, family planning clinics and tuberculosis clinics. These facilities primarily treat low-income patients and rely on 340B savings to fund patient care services to underserved and vulnerable populations.

Safety net health care providers bear full legal responsibility for keeping records and may only collect 340B revenues on certain prescriptions, including patient prescriptions for medications used to treat HIV/AIDS and hepatitis C. Most safety net providers contract with a third-party administrator, or TPA, to administer their 340B programs. The TPAs confirm eligibility for each transaction and keep detailed records, as required by the federal 340B program rules.

In 2017, CVS acquired Wellpartner, a TPA, and began requiring New York hospitals to use it. An investigation by the attorney general’s office found CVS pharmacies did not contract with hospitals that don’t use Wellpartner as their TPA, which is a violation of New York’s antitrust laws.

The 340B program rules do not allow hospitals to steer patients away from certain pharmacies. Hospitals and clinics had little choice –they either had to go along with CVS’ requirements or forgo the benefits they were entitled to, according to the lawsuit.

CVS tried to leverage the strength of its retail pharmacy network in New York to force hospitals to use Wellpartner, rather than any other TPA, James’ office said.