Consumer lawsuits have been filed against CVS and Walgreens for so-called ‘clawbacks’ that raise prices for people who buy drugs through their insurance.

If you think using your insurance always gets you the lowest price on prescription drugs, you could be wrong.

Earlier this year, Megan Schultz walked into a CVS pharmacy in California to pick up a prescription.

She used her insurance co-payment and paid $166 for the generic drug.

What she didn’t know was that if she’d paid in cash, that same generic would have cost her $92.

Schultz filed a lawsuit against CVS Health on Aug. 7, saying the chain overcharges customers who pay for certain generic drugs using their insurance.

Those costs can actually exceed the cost of the medication itself, the lawsuit states.

Not only that, the lawsuit further alleges that the company intentionally keeps this pricing structure hidden from consumers.

“CVS, motivated by profit, deliberately entered into these contracts, dedicating itself to the secret scheme that kept customers in the dark about the true price’’ of drugs, Schultz’s lawyers told the Boston Globe.

They are seeking class action status for the suit.

CVS denies Schultz’s allegations.

In a statement to Healthline, CVS spokesman Michael DeAngelis said:

“The allegations made in this proposed class action suit are built on a false premise and are completely without merit. Our pharmacists work hard to help patients obtain the lowest out-of-pocket cost available for their prescriptions… Our PBM [pharmacy benefit managers], CVS Caremark, does not engage in the practice of copay clawbacks. CVS does not overcharge patients for prescription copays and we will vigorously defend against these baseless allegations.”

Schultz’s lawsuit in California isn’t the first to fight back against this alleged practice.

Consumers have also launched a class action lawsuit in Illinois against Walgreens.

The Hagens Berman law firm states: “Walgreens appears to be making deals behind closed doors with PBMs, keeping the public in the dark about a scheme that effectively punishes customers who choose to use their insurance.”

Pharmacy benefit managers (PBMs) are companies that essentially act as middlemen between insurance companies and pharmacies — negotiating drug prices and communicating those prices to pharmacies at a retail level.

Three PBMs, Express Scripts, CVS Health, and OptimumRx, a division of UnitedHealth Group, control about 80 percent of the market and cover more than 180 million people in the United States.

When PBMs first started popping up in the late 1960s their role was drastically different than it is today.

Since then, both drug companies and pharmacies have bought up and merged with PBMs, creating a marketplace critics say is rife with conflicts of interest and murky business practices.

Ideally, PBMs help to negotiate rebates and discounts for consumers, leverage competition, and help to drive down prescription drug costs.

However, PBMs have been making headlines lately, not just in the Schultz lawsuit, because of a particular practice known as a “clawback.”

Clawbacks work like this.

A PBM negotiates for a $20 copayment for the generic of a certain drug, but that drug may actually cost only $5.

Of the remaining $15, part will go to the insurer and the rest is “clawed back” to the PBM.

Schultz’s complaint summarizes the issue succinctly: “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.”

But why do pharmacists keep quiet on the issue when dealing with consumers?

They are sometimes legally required to do so. PBM contracts often include a “gag clause,” which prevents the pharmacy from actively informing patients about cheaper pricing.

According to the Los Angeles Times, pharmacists revealed that “the patient has to affirmatively ask about pricing.”

But PBMs have fought back against lawsuits both in the press and in court, arguing that the existence of another, lower price that a customer “might wish to pay” isn’t enough to sue.

Nonetheless, many consumers and advocacy groups are incensed.

“It’s a rip off. It’s a straight up rip off,” said David Mitchell, founder and president of Patients For Affordable Drugs, an organization that advocates for cheaper drug prices.

“I believe that insurers should be able to negotiate directly with the drug companies,” he told Healthline.

“I think we should frankly get rid of PBMs, but at a minimum, if we’re going to keep PBMs as the vehicle to negotiate on behalf of patients for lower drug prices from the drug companies, then the PBMs should have to reveal what they are doing,” Mitchell added. “They should not be able to practice their business in complete secrecy.”

The secrecy of these companies is worrisome enough that on both the state and federal level lawmakers and watchdogs are taking up arms.

In a testimony before the House subcommittee on regulatory reform and antitrust law, David A. Balto, an antitrust lawyer and advocate, said that PBMs are one of the least regulated sectors of the healthcare system.

He added, the PBM market has conflicts of interest and lacks transparency and choice.

In March, Rep. Doug Collins (R-Ga.) introduced H.R. 1316, the Prescription Drug Price Transparency Act, which aims to combat the lack of oversight in the PBM industry.

“PBMs engage in predatory practices designed to boost their own profit margins at the expense of insurers, contracting pharmacies, patients, and — in their relationships with federal programs — taxpayers,” explained Collins.

Meanwhile, a bill by lawmakers in Connecticut was signed by their governor in July to prevent PBM clawbacks and allow pharmacists to tell patients about cheaper pricing if it is available.

Connecticut now joins four states — Maine, Georgia, North Dakota, and Louisiana — that have passed laws to regulate PBMs.

“Connecticut didn’t enact a law to stop something that doesn’t happen. Connecticut enacted a law to stop something that does happen,” said Mitchell.

For consumers and advocates, the bottom line is getting a fair price for prescription drugs.

They may have also found an unlikely ally in drug companies themselves.

The Pharmaceutical Research and Manufacturers of America (PhRMA), an organization that represents pharmaceutical interests, has been campaigning to inform consumers about discrepancies in price on retail drugs.

In an email, a representative from PhRMA told Healthline:

“[W]e do believe patients should receive more of the benefit of price negotiations between biopharmaceutical companies and payers… With the difference between list prices and net prices continuing to grow, patients’ cost sharing for medicines is increasingly based on prices that do not reflect the actual costs.”