BOSTON — Attorney General Andrea Campbell has reached a deal with CVS Pharmacy that will require the company to pay more than $12 million to settle claims it overbilled the state’s Medicaid program for prescription drugs.
Under the settlement announced Wednesday, CVS agreed to pay $12.25 million to MassHealth and commit to an annual “reconciliation process” in which they review prescription drug pricing for Medicaid recipients in the state to prevent against overbilling.
The deal stems from a lawsuit filed by Campbell in April alleging that CVS offered lower drug prices to cash-paying customers through a discount program administered by a company called ScriptSave, but billed MassHealth at higher rates.
In the initial complaint, the AG’s office claimed the move violated the state’s pricing regulations, which require pharmacies to charge MassHealth the lowest price they charge any other customer.
Campbell said the settlement “will prevent future inaccurate price reporting and ensure MassHealth has the resources it needs to continue serving Massachusetts residents.”
“When pharmacies overcharge MassHealth, they’re undermining the integrity of our public programs and leaving taxpayers to foot the bill,” she said in a statement.
In a statement, CVS said it is “pleased” to resolve the legal challenge but pointed out the settlement only involves MassHealth’s “unique” 1995 law that requires pharmacies to charge MassHealth the lowest price they charge to any other customer.
The company said the agreement is “not an admission of liability or wrongdoing and was agreed upon to avoid the time and expense of further litigation with Massachusetts.”
“We’ll continue vigorously defending against the claims concerning CVS Pharmacy’s usual and customary pricing brought by remaining plaintiffs in the case,” CVS spokesperson Kara Page said in the statement. “For the last several years, many pharmacies, including CVS Pharmacy, have been named as defendants in other U&C lawsuits accusing the pharmacies of having submitted inflated U&C prices.
“In the cases involving CVS, we’ve prevailed many times, including by court dismissal, jury verdict, and arbitrator award,” she added.
The state’s Medicaid spending on prescription drugs has been skyrocketing in recent years as popular — but more expensive — pharmaceuticals have been added to the list of approved medicines.
MassHealth officials estimate the state spent $35.4 million on 174 approved prescription drugs in fiscal 2024, which is more than 128% higher than the $15.5 million it spent in the previous fiscal year on about 100 approved medicines.
MassHealth spent $2.7 billion overall on pharmaceutical costs in fiscal year 2023 before rebates and the federal share of funding was factored in, and received $1.66 billion in total rebates. In fiscal 2024, the agency was expected to spend $2.9 billion on pharmacy costs and get about $1.76 billion in drug rebates.
Health care coverage is one of the state’s biggest expenses. Medicaid costs have doubled in the past decade and now account for nearly 40% of spending.
Meanwhile, deep cuts in federal funding are looming with portions of President Donald Trump’s newly minted jobs and tax cut law poised to reduce reimbursements to states for Medicaid expenses, while setting new restrictions on who qualifies for the taxpayer-funded program.