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CVS In Legal Hot Water Following Allegations Of Overpricing Generic Drugs

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CVS Health Corp. is currently being dashed as a lawsuit was filed against it on Thursday, July 30. The complaint condemns the company for the overpricing of generic drugs being sold at its stores and submitting high costs of medicines to its consumers' insurance companies.

The lawsuit, filed in the San Francisco federal court, states that the sky-high rocket prices of the drugs resulted in higher co-pays that are equivalent to the prices of the drugs purchased in the absence of an insurance account or membership to the store's discount program.

"We've seen people who pay $20 for a 30-day supply as their copayments on a drug that was $11.99 for a 90-day supply had they been in the (discount program)," says Kristen Broz, an attorney with Hausfeld law firm.

The lawsuit aims to obtain a class-action status, which is a court order that will restrain the company from continuing its so-called deceitful actions and undetermined damages.

The main issue being placed in legal hot water is the discount program by the company called, Health Savings Pass (HSP). Through this program, consumers, who do not have insurance or opt to not use their existing insurance to buy generic prescription drugs, are said to be entitled for discounts. Generic antibiotics such as Penicillin and generic antidepressants such as Prozac are also included in this program, the suit states.

The alleged deceit comes in after the drugs have been purchased and CVS submits documents to the insurance companies. According to the lawsuit, instead of indicating discounted prices in the insurance papers, CVS puts the original prices of the drugs. In turn, the customers are charged co-pays in accordance to the inflated costs.

Through this tactic, the Rhode Island-based company moves ahead of its competitors, in terms of marketing strategy, because of the attractive low prices of its drugs. Ultimately, CVS is able to hide the true prices of its products from third-party payers through the HSP program.

The company has not been able to receive the complaint so a statement cannot be made at the moment, said Michael DeAngelis, a spokesperson from CVS. Nonetheless, he said that co-pays are based on the individual patient's prescription coverage plan. A similar lawsuit filed in Massachusetts was dismissed, he adds.

CVS has 7,822 retail branches all across the US as of Dec. 31, 2014. The pharmacy chain falls second in ranks behind Walgreen Co. CVS initiated the HSP program to compete with other retailers such as Target Corp. and Wal-Mart Stores Inc.; however, it still failed to match the lower costs of the said competitors, the lawsuit stated.

Photo: David Prasad | Flickr

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