Finance: A startling lawsuit against CVS could blow up what you thought you knew about drug prices

Shultz alleges that at CVS, her generic medication she paid for using her insurance cost $165.68, but that if she had paid in cash, it would have cost $92.

What if paying for a drug with insurance didn't cost you less, but made the drug more expensive?

That's what a new lawsuit filed against CVS is alleging. The suit claims that the pharmacy agrees with pharmacy benefit managers, or PBMs — the middlemen of the industry who manage the list of what drugs an insurer will and will not pay for — to sell certain drugs at a higher price if a customer is paying with insurance.

The lead plaintiff in the case is a woman named Megan Shultz, and she claims that when she went to CVS to pay for a generic medication using her insurance, it cost $165.68, and that if she had paid in cash, the same medication would've cost only $92.

Here's why, according to the complaint:

• The PBMs can control which pharmacies are "in network" for their clients, the insurers.
• Since CVS's pharmacies want those sales from in-network patients, they offer the PBMs a cut of the drugs they're selling to those insured patients.

What's more, Shultz says she had to find this out on her own because no one at CVS could legally give her a heads up. From the complaint:

"These agreements with PBMs are based on secret, undisclosed contracts, under which CVS agrees to specific amounts it will charge and collect from insured customers — but the customers can neither see nor learn the terms of these agreements or their terms from the pharmacies, the insurance companies, or anyone else. The linchpin of the scheme is that the customer pays the amount negotiated between the PBM and CVS even if that amount exceeds the price of the drug without insurance."

The suit also alleges that CVS pharmacies charge customers a "co-pay" that's instead additional money CVS shares with the PBM. It works like this, according to the complaint:

CVS said the allegations were "built on a false premise and are completely without merit." Here's a statement the company emailed Business Insider:

"Co-pays for prescription medications are determined by a patient's prescription coverage plan, not by the pharmacy. Pharmacies collect the co-pays that are set by the coverage plans. Our pharmacists work hard to help patients obtain the lowest out-of-pocket cost available for their prescriptions. Also, our PBM CVS Caremark does not engage in the practice of co-pay clawbacks. CVS has not overcharged patients for prescription co-pays, and we will vigorously defend against these baseless allegations."

The lawsuit alleges that doesn't happen with every prescription, just a select number. However, the drugs named in the suit — like Tamiflu, amoxicillin, and Viagra — are pretty common. You can see the full list here.

As for the PBMs, three large companies control about 80% of the market in the United States. One of them, Caremark, is owned by CVS, and another, Optum Rx, is owned by UnitedHealth. The largest of all PBMs, though, and the only standalone one, is Express Scripts.

Shultz alleges that at CVS, her generic medication she paid for using her insurance cost $165.68, but that if she had paid in cash, it would have cost $92. Read Full Story