August 15, 2026  ·  Complaint filed July 16, 2026  ·  mied, No. 2:26-cv-12435

Newman News, By David Brunk

Read the filing

Henry Ford Hospital v. CVS Health Alleges $29 Million Scheme to Divert 340B Drug Savings

Jurisdictional Threshold and Case Overview

The complaint in Henry Ford Hospital, et al. v. CVS Health Corporation, et al., filed on July 16, 2026, alleges a coordinated scheme by CVS Health Corporation and its subsidiaries to divert savings intended for Covered Entities under the 340B Drug Pricing Program. The lawsuit meets the $75,000 amount in controversy threshold required for diversity jurisdiction, as specified in the complaint (Compl. ¶43). Plaintiffs—Henry Ford Hospital, Henry Ford Health Jackson Hospital, Henry Ford St. John Hospital, and Henry Ford Health Wyandotte Hospital—seek damages exceeding $29 million, injunctive relief, and treble damages for alleged violations of federal and state laws, including the Racketeer Influenced and Corrupt Organizations Act (RICO).

How the Scheme Worked

The complaint alleges that CVS Health Corporation and its subsidiaries—CaremarkPCS Health, LLC (PBM), Caremark, LLC d/b/a CVS Specialty (contract pharmacy), and WellPartner, LLC (third-party administrator)—orchestrated a coordinated scheme to divert 340B drug savings intended for Covered Entities and their indigent patients. Under the 340B Drug Pricing Program, Covered Entities like Henry Ford Hospital receive discounted drug prices to fund charitable care for low-income and uninsured patients. The filing describes the program’s purpose as stretching scarce federal resources to reach more eligible patients and provide comprehensive services, including direct clinical care to large numbers of uninsured Americans regardless of their ability to pay. The complaint quotes the program’s intent: "stretch scarce Federal resources as far as possible, reaching more eligible patients and providing more comprehensive services" (Compl. ¶58). It further emphasizes that the program aims to "provide direct clinical care to large numbers of uninsured Americans regardless of their ability to pay" and "reach more eligible patients and provide more comprehensive services" (Compl. ¶58–59).

Plaintiffs entered into Pharmacy Services Agreements with CVS Specialty, which required Defendants to dispense 340B drugs and remit all reimbursements from payors to Plaintiffs, minus a dispensing fee. The agreements explicitly stated that all reimbursement received for 340B drugs must be remitted to the Covered Entity, less a dispensing fee. However, Defendants allegedly exploited their vertical integration to secretly lower reimbursement rates for 340B claims, retaining the difference—the "Spread"—as profit. The complaint alleges that this scheme "not only constitutes a breach of contract... but also constitutes a deceptive and unfair practice under the Michigan Consumer Protection Act § 445.903, common law fraud, and violations of [RICO]" (Compl. ¶16).

The scheme operated as follows: after dispensing drugs, WellPartner flagged 340B-eligible claims. Defendants then artificially reduced the reimbursement rate for these claims, reporting a lower amount to Plaintiffs while retaining the Spread. For example, a Stelara prescription adjudicated at $27,460.67 was reported to Plaintiffs as $20,292.91, with Defendants pocketing the $7,167.76 difference. Similarly, a Cosentyx claim was reimbursed at $5,311.34 by CVS Specialty, while Henry Ford Hospital received $7,188.62, resulting in a $1,877.28 Spread retained by Defendants. For an Xeljanz claim involving 60 units, CVS Specialty reimbursed $4,008.27 ($66.80 per unit), while Silverscript reported an average unit cost of $99.59 for Xeljanz in the fourth quarter of 2025, reflecting a per-pill reduction of approximately $33 (Compl. ¶141–142). The complaint also notes that the average payment for non-340B Stelara under the Henry Ford Plan was $28,444, further highlighting the disparity in reimbursement rates (Compl. ¶137).

The complaint provides a hypothetical example to illustrate the scheme: if the Average Wholesale Price (AWP) of a drug is $10,000, the standard reimbursement rate might be AWP minus 10%, or $9,000. However, Defendants allegedly reduced the rate for 340B claims to AWP minus 35%, or $6,500, retaining a "Spread" of $2,500 (Compl. ¶123–124). The complaint alleges that Defendants secretly lowered 340B remittance via their vertical integration (PBM, contract pharmacy, and TPA) to retain additional revenue (Compl. ¶8–9).

The scheme is described as hidden from payors, Covered Entities, and patients. Patients paid co-pays and co-insurance based on the higher adjudicated prices, but the excess was not refunded. Defendants allegedly concealed the reduced 340B rates by falsely reporting reimbursement amounts in remittance reports, which showed a lower "Gross Insurance Payment" than the actual amount received. The complaint alleges that WellPartner falsely reported $0 for patient co-pays or co-insurance on most 340B claims (Compl. ¶116). The complaint further alleges that CaremarkPCS and CVS Specialty conspired to artificially reduce reimbursement rates after identifying a 340B claim, hiding the scheme from payors and patients (Compl. ¶122).

Retaliation and Audit Refusal

On November 19, 2025, Plaintiffs served an audit demand letter on CVS Health and Caremark LLC, requesting access to books and records to verify compliance with the Pharmacy Services Agreements and federal regulations. The audit demand specifically requested adjudication records, communications, reconciliation reports, invoices, and reimbursement addenda (Compl. ¶164). As of the complaint’s filing, Defendants had not meaningfully responded to the audit request. The complaint alleges that Defendants refused Plaintiffs’ request for access to pharmacy books and records, violating the audit provisions of the agreements (Compl. ¶249).

On April 22, 2026, Defendants gave notice of termination of the Pharmacy Services Agreements, which the complaint alleges was in retaliation for Plaintiffs’ audit request. The complaint states: "Defendants gave notice of termination of the Agreements in retaliation for uncovering the scheme and seeking to conduct an audit..." (Compl. ¶166). Plaintiffs seek an injunction to enforce the audit provisions of the agreements and to prevent future retaliatory terminations, as well as an order enjoining Caremark LLC and CVS Specialty from restricting Plaintiffs’ access to books and records (Compl. ¶249). The complaint further alleges that Defendants terminated the agreements in response to Plaintiffs’ exercise of their audit rights under 340B Program rules and HRSA regulations (Compl. ¶250). The complaint notes that Plaintiffs sent a demand letter to Caremark LLC and CaremarkPCS requesting access to books and records for audit, including adjudication records, communications, reconciliation reports, invoices, and reimbursement addenda (Compl. ¶163–164).

Legal Claims and Predicate Acts

The complaint asserts nine counts against Defendants, including breach of contract, fraud, violations of the Michigan Consumer Protection Act, and racketeering under the Racketeer Influenced and Corrupt Organizations Act (RICO). The RICO claim, brought under 18 U.S.C. § 1962(c), alleges that Defendants engaged in a pattern of racketeering activity through predicate acts including wire fraud, embezzlement from employee benefit plans, and violations related to the operations of such plans. Specifically, the complaint alleges the following predicate acts:

• Embezzlement from Employee Benefit Plan (18 U.S.C. § 664): Defendants allegedly unlawfully converted funds connected with welfare benefit plans by diverting 340B payments intended for Plaintiffs to themselves (Compl. ¶216). The complaint states that Defendants violated this statute by "diverting these 340B payments that should be flowing in the ordinary course to the Plaintiffs to themselves" (Compl. ¶216).
• Offer, Acceptance, or Solicitation to Influence Operations of Employee Benefit Plan (18 U.S.C. § 1954): Defendants allegedly accepted kickbacks, commissions, or other things of value exceeding bona fide compensation to influence the operations of employee benefit plans (Compl. ¶218). The complaint describes these as "kickback, commission, gift, loan, money, or thing of value" (Compl. ¶218).
• Wire Fraud (18 U.S.C. § 1343): Defendants allegedly devised and executed a coordinated wire fraud scheme by transmitting false reimbursement data via interstate wires. The complaint alleges that Defendants transmitted monthly electronic remittance reports to Plaintiffs that misrepresented the reimbursement amounts for 340B claims. For example, a January 2025 remittance report reflected a "Payor Reimbursement" of $20,292.91 for the Stelara prescription, while the actual adjudicated amount was $27,460.67 (Compl. ¶125, ¶221). These false wire communications are alleged to be part of a coordinated scheme to deprive Plaintiffs of 340B savings (Compl. ¶220). The complaint further alleges that Defendants transmitted these false reimbursement reports beginning in January 2020, when WellPartner began sending monthly electronic remittance reports to Plaintiffs via interstate wire (Compl. ¶220).

The complaint alleges that these predicate acts constitute a "pattern" of racketeering activity under 18 U.S.C. § 1961 and that Plaintiffs relied on the false wire communications to their financial detriment (Compl. ¶224–225). Plaintiffs seek an injunction pursuant to 18 U.S.C. § 1964(a) to prevent future violations of 18 U.S.C. § 1962.

The complaint also includes the following causes of action:

• Count I: Breach of Contract: The complaint alleges that Defendants breached the Pharmacy Services Agreements by failing to remit all reimbursement for 340B drugs to Plaintiffs, lowering reimbursement rates, violating HRSA and Office of Pharmacy Affairs (OPA) regulations, ignoring audit requests, and violating Michigan’s 340B Pricing Law (Compl. ¶177). The agreements required Defendants to remit all reimbursement, less a dispensing fee, to Plaintiffs (Compl. ¶171), comply with HRSA/OPA regulations (Compl. ¶173), and allow Plaintiffs to audit Defendants’ records (Compl. ¶174). The agreements also required compliance with Michigan’s 340B Pricing Law, MCL § 550.926 (Compl. ¶175).
• Count II: Violation of Michigan Consumer Protection Act § 445.903: The complaint alleges that Defendants engaged in deceptive and unfair practices by diverting 340B savings through discriminatory pricing, coordinating a scheme to reduce 340B savings for Plaintiffs, and misrepresenting compliance with HRSA and OPA regulations. The complaint further alleges that Defendants concealed a secret 340B pricing arrangement that slashed reimbursement rates (Compl. ¶183–189). The complaint states that Defendants engaged in deceptive conduct with the goal of "reducing the amount of 340B savings received by Plaintiffs while Defendants" retained the difference (Compl. ¶184).
• Count III: Common Law Fraud: The complaint alleges that Defendants conspired to process 340B claims under a secret discriminatory pricing scheme, falsely representing that all reimbursement, less a fee, would pass to Plaintiffs. Defendants allegedly concealed the scheme by secretly lowering reimbursement rates and misrepresenting the amounts paid to Plaintiffs (Compl. ¶197–203). The complaint alleges that Defendants knowingly carried out the scheme to steal 340B savings (Compl. ¶205).
• Count V: Violation of Michigan’s 340B Pricing Law, MCL § 550.926: The complaint alleges that Defendants engaged in discriminatory reimbursement practices by paying less favorable rates for 340B drugs compared to non-340B drugs. The complaint states that this scheme violates MCL § 550.926, which prohibits such discriminatory practices (Compl. ¶17). The complaint notes that the benefit of the 340B program "was intended to accrue to the covered entities – not to the PBMs" (Compl. ¶106). The complaint further alleges that Defendants failed to comply with HRSA/OPA guidelines (Compl. ¶107).
• Count VI: Breach of the Implied Covenant of Good Faith and Fair Dealing: The complaint alleges that Defendants breached the implied covenant of good faith and fair dealing by creating a secret 340B arrangement to divert savings intended for Plaintiffs. The complaint quotes the implied covenant: "neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract" (Compl. ¶230–231).
• Count VII: Unjust Enrichment: The complaint alleges that Defendants’ retention of the 340B Spread constitutes unjust enrichment, as it deprived Plaintiffs of funds intended for indigent care. The complaint defines unjust enrichment as "the receipt of a benefit by the other party from the complaining party and an inequity resulting to the complaining party because of the retention of the benefit by the other party" (Compl. ¶237). The complaint further states: "By retaining Spread and taking money intended to flow to Plaintiffs for use in indigent care in accordance with the 340B Program..." (Compl. ¶167).
• Count VIII: Tortious Interference with Contract: The complaint alleges that Defendants tortiously interfered with the Pharmacy Services Agreements by executing a secret 340B arrangement to divert savings intended for Plaintiffs (Compl. ¶240).
• Count IX: Breach of Contract Relating to the Denial of an Audit: The complaint alleges that Defendants breached the Pharmacy Services Agreements by denying Plaintiffs’ audit request and terminating the agreements in retaliation. Plaintiffs seek an accounting of Defendants’ records to determine the full extent of their damages (Compl. ¶247–251). The complaint states that Defendants refused Plaintiffs’ audit request and terminated the agreements in response to Plaintiffs’ exercise of their audit rights under the agreements, consistent with their obligations under 340B Program rules (Compl. ¶250).

Damages and Industry Context

The complaint alleges that Plaintiffs suffered over $29,140,614 in damages from 2020 to 2025 due to Defendants’ scheme. The breakdown of estimated losses is as follows: $939,292 in 2020; $4,232,994 in 2021; $5,059,053 in 2022; $6,415,147 in 2023; $7,029,722 in 2024; and $5,464,403 in 2025 (Compl. ¶19, ¶178, ¶192, ¶204). Plaintiffs seek treble damages for the improperly retained 340B revenue and Spread, as well as injunctive relief to prevent future violations. The complaint notes that Defendants retained 55.5% of the 340B savings from 2020 to 2025, while Covered Entities received only 44.5% (Compl. ¶152).

The complaint provides industry context to support its allegations, noting that three PBMs—CaremarkPCS, Express Scripts, and OptumRx—control nearly 80% of the prescription drug market (Compl. ¶64, ¶68). CaremarkPCS alone controls 27% of the PBM market nationally (Compl. ¶69). The number of contract pharmacy arrangements with 340B providers grew by 4,228% between 2010 and 2020, reaching 83,000 relationships in 2024. The defendant increased its PBM-affiliated contract pharmacy relationships from approximately 23,000 in 2020 to 77,000 in 2025 (Compl. ¶65). Nationally, there were an estimated 230,000 contract pharmacy relationships, with CVS Health accounting for approximately 77,000 of these (Compl. ¶66). CVS Health-affiliated contract pharmacies reported more than $800 million in gross profits in 2022 and 2023 (Compl. ¶67, ¶223).

The complaint alleges that Defendants’ control over the drug supply chain allowed them to engage in fraudulent schemes, including the 340B discriminatory pricing scheme at issue. The filing states that a small number of vertically integrated corporations wield near-limitless power in the prescription drug market, enabling such schemes (Compl. ¶63). The complaint further alleges that CVS Health mandated the use of WellPartner as the 340B third-party administrator to hide fraudulent activity and divert 340B savings (Compl. ¶82). The complaint notes that 340B eligibility determination occurs after drugs are dispensed, not at the point of sale, which facilitated the scheme (Compl. ¶83).

The complaint emphasizes that the 340B Program was not intended to create financial windfalls for PBMs but to support Covered Entities in providing care to indigent and uninsured patients. The complaint alleges that Congress did not intend 340B discounts to become a financial windfall for PBMs (Compl. ¶61). The complaint further alleges that the 2010 HRSA guidance permitting unlimited contract pharmacy relationships opened the door for PBMs to misappropriate 340B funds intended for non-profit providers (Compl. ¶57). The complaint alleges that Defendants’ scheme prevented 340B savings from reaching Plaintiffs for indigent and non-insured care, impacting the poorest and most vulnerable patients (Compl. ¶91, ¶193).

The complaint also highlights the role of unnamed co-conspirators, referred to as John Does 1-15, who are alleged to have executed and ratified the fraudulent arrangement between CaremarkPCS and Caremark LLC d/b/a CVS Specialty, knowing it would deprive Plaintiffs of 340B revenue. These Doe defendants are described as officers or employees of CVS Health, CaremarkPCS, and Caremark LLC who acted within the course, scope, and authority of their employment (Compl. ¶39–42).

The allegations in the complaint remain unproven, and no defendant has yet responded to the claims.

The allegations described here are taken from the filing and remain unproven; no responsive pleading is reflected in the source document.

David Brunk is a civil litigation attorney. He can be reached at david@newmanbrunk.com.