Lawsuit: Prime Therapeutics’ reimbursement plan is costing CVS $100M per year

Prime Therapeutics is suing CVS Health Corp. after the drugstore chain claimed generic drug payment changes will cost it more than $100 million annually.
CVS is seeking about $19 million outside of court from Eagan-based Prime, claiming the pharmacy-benefits manager violated terms of a 2007 agreement plus federal and state laws, according to a lawsuit filed Tuesday. Prime disputes those claims and is asking a Minnesota federal judge to rule that it did nothing wrong and doesn’t owe CVS money.
Prime Therapeutics is suing CVS in a dispute over generic drug reimbursement.
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Prime Therapeutics is suing CVS in a dispute over generic drug reimbursement.

CVS is “surprised and disappointed” by the legal action, said a spokesman who declined to comment on the allegations because the company hasn’t been served with the suit, filed in Minnesota’s U.S. District Court Tuesday.

Prime is “hopeful for a quick resolution to this litigation and does not anticipate any member disruption,” a spokeswoman said.
The dispute stems from how Prime reimburses CVS for generic drugs. Prime adjusted its reimbursement for generics in July, a move CVS claimed will cost it more than a $100 million per year, according to the suit. The companies tried to resolve the conflict outside of court, but were unsuccessful.
The lawsuit doesn’t say by how much Prime adjusted its prices, or which laws CVS claims were violated.
CVS sent a letter Dec. 9 stating it expects Prime to return reimbursement levels to pre-July levels. CVS also told Prime to pay back the money CVS lost because of the mid-year adjustment.

“While we are quite familiar with the fluidity of pricing in the changing marketplace, the changes instituted by Prime go far beyond fluidity and undermine the pricing terms agreed to by the parties,” CVS wrote in the letter, according to an excerpt included in the suit.
Prime Therapeutics negotiates drug prices with pharmacies on behalf of 13 Blue Cross and Blue Shield plans nationwide. Prime had about a 6 percent share of the pharmacy-benefits management market in 2014, according to the Pharmacy Benefit Management Institute.
If CVS is losing more than $100 million on the Prime arrangement, that won’t put a big dent in the company’s overall sales. The Woonsocket, R.I.-based company’s revenue totals about $39 billion.
CVS (NYSE: CVS) operates more than 7,900 retail pharmacies and recently spent $1.9 billion to buy Minneapolis-based Target Corp.’s pharmacy business.
Katharine Grayson covers med tech, clean tech, technology, health care and venture capital.

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