Hospitals Sue CVS Health Over $250M Diversion of 340B Program Funds

Three prominent health systems-Mount Sinai, Michigan Medicine, and the University of Kansas Health System-are suing CVS Health, accusing the company of diverting roughly $250 million in savings from the 340B Drug Pricing Program. The lawsuits, filed on Monday, claim that CVS and its pharmacy benefit manager, CVS Caremark, used a practice known as "spread pricing" to retain funds intended to support care for low-income and uninsured patients.

The 340B program, established in 1992, is designed to help safety-net providers better serve vulnerable populations by allowing eligible hospitals and clinics to purchase outpatient drugs at steeply discounted prices. The diverted funds, the health systems allege, should have been used to expand access to care for underserved communities.

The Legal Battle

The complaints filed by Mount Sinai, Michigan Medicine, and the University of Kansas Health System detail how CVS Caremark set up reimbursement structures that retained the gap between insurer payments and reimbursements passed on to 340B providers. This "spread pricing" practice, according to the lawsuits, redirected funds meant to support care for low-income and uninsured patients.

Jonathan Levitt, founding partner at Frier Levitt, the law firm representing the plaintiffs, stated that CVS violated the intent of the 340B program. “CVS Health’s mission statement commits the company to lowering the cost of care and improving the health and well-being of those it serves,” he said in a statement issued Thursday. “What our Complaints allege is the opposite: that behind the scenes, CVS systematically diverted funds Congress specifically designated to help safety-net hospitals care for the most vulnerable Americans-and pocketed them as corporate profit.”

The lawsuits also highlight the significant impact this diversion has had on the health systems. Between 2020 and 2025, the practice allegedly resulted in roughly $250 million in diverted funds. This money, if properly allocated, could have been used to enhance services, improve patient care, and expand access to essential medications for underserved populations.

Why It Matters

The legal battle between these health systems and CVS Health underscores a broader issue in the healthcare industry: the balance between corporate profit and public service. The 340B program is a critical lifeline for safety-net providers, enabling them to offer affordable care to some of the most vulnerable patients. If companies like CVS are able to divert funds meant for these programs, it could have far-reaching consequences for patient care and access to essential services.

Dan Peters, general counsel for the University of Kansas Health System, emphasized the importance of accountability. “Our organization is committed to ensuring that the funds designated by Congress reach their intended recipients,” he said. “This lawsuit is about more than just financial recovery; it’s about upholding the integrity of a program designed to help those who need it most.”

The outcome of these lawsuits could set a precedent for how other pharmacy benefit managers and healthcare companies operate within the 340B program. It may also influence future regulations and oversight to prevent similar practices from occurring, ultimately ensuring that funds are used to support the communities they were intended to serve.

As this legal battle unfolds, it serves as a reminder of the ongoing tension between profit motives and public health needs in the healthcare industry. The resolution of these cases will have significant implications for both patients and providers, shaping the future of how critical healthcare programs are managed and funded.