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CVS siphoned millions from 'safety net' hospitals - New York lawsuit

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By Brendan Pierson and Manas Mishra

NEW YORK (Reuters) - New York on Thursday sued CVS Health Corp for allegedly forcing hospitals that serve low-income patients to pay millions of dollars to access discounted prescription drugs, violating state antitrust law.

In a lawsuit filed in state court in Manhattan, New York Attorney General Letitia James said CVS group abused its market power by requiring hospitals and clinics to use a CVS subsidiary, Wellpartner, to fill prescriptions for discounted drugs at CVS pharmacies.

"While safety net health care providers are tackling public health crises and helping underserved communities, CVS is robbing them out of millions of desperately needed funds that could improve patient care," James said in a statement.

"These allegations are without merit and we will defend ourselves vigorously," CVS said in a statement.

The lawsuit centers on so-called safety net providers, which are eligible for discounted drugs because they serve predominantly lower-income patients under a federal program known as 340B.

Most providers contract with outside companies to administer their 340B programs, which requires extensive recordkeeping to comply with federal rules. CVS bought Wellpartner, a third-party 340B administrator, in 2017.

James' lawsuit said that CVS then began refusing to contract with providers that did not use Wellpartner to obtain 340B benefits. Because 340B rules forbid providers from steering patients away from particular pharmacies, the providers were forced either to start using Wellpartner, or to forego 340B discounts when patients chose to fill their prescriptions at CVS.

Many providers already had contracts with other 340B administrators, but most switched to Wellpartner for all their 340B prescriptions, even those not filled at CVS, because it was not economical to pay two contractors, the lawsuit said.

James is seeking a court order blocking CVS from requiring providers to use Wellpartner, and an unspecified amount of money damages.

(Reporting by Brendan Pierson in New York and Mrinalika Roy in Bengaluru; Editing by Devika Syamnath, David Holmes and Aurora Ellis)

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