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ALEXANDRIA, Va. – Independent pharmacies scored a significant win as a federal judge in Arizona ruled against CVS Health in a pivotal class action lawsuit. In Osterhaus Pharmacy Inc. v. CVS Health Corporation, U.S. District Judge John J. Tuchi declared that the court, not an arbitrator, must decide whether claims brought against CVS are subject to arbitration.
The National Community Pharmacists Association (NCPA) praised the decision, which challenged CVS's use of forced arbitration clauses. Judge Tuchi ruled that CVS's approach, which demanded even the question of arbitration be arbitrated, was "unconscionable" due to the unfair barriers it imposed.
While other aspects of the case remain unresolved, NCPA CEO B. Douglas Hoey expressed optimism. "It's payback time," Hoey said. "Community pharmacies finally have a chance to recover what's been unfairly taken. PBMs have gamed the system for too long, and this ruling is a step toward justice."
The association's General Counsel, Matthew Seiler, called the ruling a breakthrough for independent pharmacies battling pharmacy benefit managers. "Caremark and other PBMs manipulate arbitration to shield themselves from accountability," Seiler said. "These clauses strip pharmacies of their rights and keep unlawful practices hidden. This decision exposes these abuses and brings hope for transparency and fairness."
The lawsuit, filed by NCPA member Matt Osterhaus in September 2023, targets CVS's controversial DIR (direct and indirect remuneration) fees, which siphon billions of dollars from pharmacies. The delegation clause, requiring arbitration disputes to also go through arbitration, was a key focus of the court's recent decision.
"We've been fighting the PBMs on behalf of our members on Capitol Hill, in the agencies, and in the courts for decades. We've made a lot of progress on all those fronts. But this is a fight directly benefiting our members and a way to potentially get back some of the billions of dollars in fees wrongfully taken by the PBMs," said Hoey.
