The Scheme

On March 18, 2026, the Roofers’ Unions Welfare Trust Fund filed a 77-page federal class action lawsuit in the U.S. District Court for the District of Rhode Island alleging that CVS Health Corporation and its subsidiary CaremarkPCS Health, LLC operated a criminal racketeering enterprise to defraud union health plans, self-funded employers, and government programs across the United States.

The lawsuit accuses CVS of creating a fake group purchasing organization (GPO) called Zinc Health Services, LLC in March 2020 for the sole purpose of disguising billions of dollars in kickbacks from pharmaceutical manufacturers. Under the scheme, CVS Caremark sold access to its drug formularies to the highest bidder, gave preferential placement to expensive brand-name drugs over cheaper generics, and diverted manufacturer rebate payments that were contractually owed to health plan customers into Zinc’s accounts.

The named plaintiff is a union welfare trust fund that provides health benefits to roofers, waterproofers, and allied workers through Local 11. The lawsuit seeks to represent a nationwide class of all health insurance companies, health maintenance organizations, self-funded health and welfare benefit plans, third-party payors, and any other health benefit providers that paid for Caremark’s pharmacy benefit management services between March 18, 2020, and the present.

“It was all on paper and it was all transactional money flowing through contracts, there was nothing I had to send to you or sell to you, here buy 500 of these, it was access to the formularies.”
—Former Caremark and Zinc Director, quoted in the complaint

The complaint alleges violations of the Racketeer Influenced and Corrupt Organizations Act (RICO), wire fraud, breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment. It cites investigations by the Federal Trade Commission, the House Committee on Oversight and Accountability, the Illinois Attorney General, and investigative reporting by the New York Times and Hunterbrook Media.

The Non-Financial Ledger

For union members covered by the Roofers’ Unions Welfare Trust Fund, prescription drug benefits are supposed to be one of the core protections their collective bargaining secured. These are roofers and waterproofers—people who work outdoors in dangerous conditions, exposed to heat, cold, chemicals, and heights. Their health insurance is not a perk. It is compensation deferred from wages and negotiated in good faith.

When Roofers contracted with CVS Caremark to manage prescription drug benefits, the union trusted Caremark to act as a fiduciary. Caremark promised it would negotiate the lowest possible drug prices, design formularies to prioritize cost-effective medications, and pass through manufacturer rebates to the health plan. Roofers paid Caremark billions of dollars over the course of the contract period based on those promises.

What Caremark actually did, according to the lawsuit, was create a shell company to pocket the rebates, manipulate formularies to favor the most expensive drugs, and exclude cheaper alternatives—all while lying to Roofers about transparency and cost savings.

The impact on individual union members is not abstract. When Caremark gives preferential formulary placement to a brand-name drug that costs $80,000 per year instead of a biosimilar that costs a fraction of that amount, the health plan pays more. When the health plan pays more, union members face higher out-of-pocket costs, reduced coverage, or cuts to other benefits. In some cases, members are forced to switch medications mid-treatment because the health plan can no longer afford the inflated costs Caremark’s formulary manipulation created.

One example cited in the complaint involves the state of Oklahoma’s employee health plan. According to insurance documents obtained by the New York Times, CVS Caremark charged the plan $138,000 per year for a cancer drug called Everolimus. The wholesale cost for a local pharmacist to purchase the same drug was $14,000. Caremark pocketed the $124,000 difference. That is not a billing error. That is theft.

The union members who depend on these health plans are not wealthy. They are workers who negotiated for healthcare because they could not afford to buy it on the private market. When CVS Caremark diverts billions of dollars in rebates meant for those health plans into a fake subsidiary, it is not just a breach of contract. It is a betrayal.

For retirees on fixed incomes, the cost increases caused by Caremark’s formulary manipulation can mean choosing between medication and groceries. For younger workers with families, it can mean delaying or skipping care entirely. The lawsuit does not name these individuals, but they are the reason the case was filed. Their names are on every invoice, every denied claim, and every out-of-pocket expense that should not have existed.

Legal Receipts

The Contract Terms CVS Broke

Section 7.1 of the standard CVS Caremark Prescription Benefit Services Agreement states:

“[Caremark will] contract with pharmaceutical companies for Rebates as a group purchasing organization for the [Caremark PBM customer].”

Section 7.4 of the same agreement states:

“CVS, Caremark, and their affiliates may receive and retain compensation from pharmaceutical companies [only] for the provision of services, such as care management, program administration, adverse event and other data reporting, and fulfillment services.”

The lawsuit alleges that CVS created Zinc specifically to violate these terms. By channeling manufacturer payments to Zinc and labeling them as “rebate administration fees” and “data services fees” instead of rebates, CVS avoided its contractual obligation to share those payments with health plan customers. The payments were not for bona fide services. They were kickbacks in exchange for formulary access and favorable drug placement.

The Illinois Attorney General Settlement

On June 24, 2024, CVS Caremark entered into a settlement agreement with the State of Illinois following an investigation into allegations that Caremark had “unlawfully deprived the State” of rebate payments and had “failed to adequately disclose to [Illinois] the nature or the relationship between Caremark” and Zinc.

Under the terms of the settlement, Caremark agreed to pay $45 million to Illinois immediately, with additional payments required under a “true-up process.” The settlement was not publicly reported until July 23, 2024—one month after it was executed.

The FTC Investigation

On July 9, 2024, the U.S. Federal Trade Commission Office of Policy Planning issued an interim staff report titled “Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies.”

The FTC report stated:

“Rebate aggregators [like Zinc] have introduced novel fees such as data/portal fees and vendor fees to collect money from drug companies. Healthcare analysts have estimated that [the three largest PBMs] have extracted from drug manufacturers billions of dollars in additional fees, which nearly doubled from approximately $3.8 billion in 2018 to $7.6 billion in 2022.”

The FTC further concluded:

“Rebates and fees may shift costs and misalign incentives in a way that ultimately increases patients’ costs and stifles competition from lower-cost drugs, especially when generics and biosimilars are excluded or disfavored on formularies.”

On September 20, 2024, the FTC filed an administrative complaint against CVS Caremark, Zinc Health Services, and the two other largest PBMs in Docket No. 9437.

The House Oversight Committee Report

On July 9, 2024, the House Committee on Oversight and Accountability issued a report titled “The Role of Pharmacy Benefit Managers in Prescription Drug Markets.”

The report found:

“Each PBM [including Caremark] places strong considerations on the financials of a medication when determining what tier to place the medication.”

The report identified 300 examples in which Caremark and the other two leading PBMs “preferred medications that cost at least $500 more per claim than a comparable medication excluded from their formularies.”

Testimony from Drug Company Executives

During a May 10, 2023, Senate Health Committee hearing, the CEO of Eli Lilly, David Ricks, testified:

“Securing positions on PBM formularies requires [drug] manufacturers to pay ever-increasing rebates and fees. [Eli Lilly paid] $1 billion in fees in a single year to ensure our medicines were covered.”

Executives from Sanofi and Novo Nordisk testified at the same hearing that $0.75 to $0.84 of every dollar spent on the list price of many of their drugs goes directly to PBMs or their affiliated GPOs.

What a Former PBM Executive Said

A former Senior Vice President at UnitedHealth Group, which owns the PBM OptumRx, explained the GPO fee structure in an interview cited by the complaint:

“You can call them compliance fees, you can call adherence fees, you can call them data fees, whatever. I like humor as well. It’s essentially: how do we shake down pharma for more money?”

The same executive explained how the fees flow through to drug prices:

“GPOs are just another middleman. They’re taking a piece out. Pharma manufacturers just build this into their pricing. When they’re doing their pricing modeling, part of the pricing modeling is what is the value of this drug, but they also look at, ‘Hey, I’ve got to pay up 300 basis points to the GPO. I’m going to have to pay another 2% in administrative fees or compliance fees or whatever it is.'”

Societal Impact Mapping

Environmental Degradation

This case does not involve direct environmental harm. However, the pharmaceutical supply chain’s consolidation under PBM control has indirect environmental consequences. When PBMs exclude lower-cost generic drugs and biosimilars in favor of brand-name drugs, they increase the volume of proprietary pharmaceutical production, which carries a heavier environmental footprint due to patent-protected manufacturing processes that are less efficient than generic production. The exclusion of biosimilars for drugs like Humira, as alleged in the complaint, extends the market dominance of biologic drugs that require energy-intensive production and cold-chain logistics.

Public Health

The complaint alleges that CVS Caremark’s formulary manipulation scheme has caused widespread harm to public health by increasing prescription drug costs and restricting access to affordable medications.

The FTC report cited in the complaint found that PBM formulary exclusions and tier placements can “stifle competition from lower-cost drugs, especially when generics and biosimilars are excluded or disfavored on formularies.” The result is that patients face higher out-of-pocket costs, which leads to medication non-adherence. According to public health research, medication non-adherence is a leading cause of preventable hospitalizations and disease progression.

The complaint cites the example of Semglee, a generic insulin. When the manufacturer Viatris released Semglee at a 65% lower list price than the brand-name equivalent Lantus, CVS Caremark and other major PBMs excluded Semglee from their formularies. When Viatris rereleased the same product at a higher price (only 5% lower than Lantus), CVS Caremark added it to formularies. The message was clear: lower prices are not rewarded; higher prices are.

The impact on diabetic patients is direct and measurable. Insulin non-adherence due to cost is associated with diabetic ketoacidosis, hospitalizations, and premature death. A 2019 study published in JAMA Internal Medicine found that one in four patients with diabetes reported cost-related insulin underuse. PBM formulary manipulation is a structural driver of that underuse.

The House Oversight Committee report cited in the complaint found that PBMs “placed more generics on non-generic formulary tiers with higher cost-sharing,” which “allows PBMs to generate additional revenue” while increasing patient costs. This is not a side effect. It is the business model.

Economic Inequality

The economic harm caused by CVS Caremark’s alleged scheme falls disproportionately on working-class Americans, union members, and retirees on fixed incomes. These are the populations that rely on employer-sponsored health plans and union-negotiated benefits. When PBMs divert billions of dollars in rebates and drive up drug costs, the financial burden is transferred to health plan participants through higher premiums, higher deductibles, and higher out-of-pocket costs.

The complaint alleges that CVS Caremark’s scheme has cost health plans billions of dollars in diverted rebates and inflated drug costs. To put that in perspective, the Illinois settlement alone was $45 million for a single state Medicaid program. Extrapolated across all 50 states and the private employer and union health plan market, the total economic harm is likely in the tens of billions of dollars.

That money does not disappear. It is transferred from health plans to CVS, Zinc, and pharmaceutical manufacturers. The result is a wealth transfer from workers, retirees, and taxpayers to corporate shareholders and executives. According to CVS’s own SEC filings, CVS Health Corporation reported $357.8 billion in revenue in 2024. A significant portion of that revenue is derived from PBM operations and the fees that CVS Caremark and Zinc extract from pharmaceutical manufacturers and health plans.

The complaint cites a former drug company executive who explained that when he negotiated with entities like Zinc, he had a fixed pool of money to cover rebates and fees. When Zinc demanded higher fees, he reduced rebates to health plans. The drug company did not care how the money was allocated. CVS Caremark cared a great deal, because fees paid to Zinc do not have to be shared with health plan customers.

For union members like the roofers represented by the plaintiff, this is not an abstract economic question. It is a direct reduction in the value of their compensation. Health benefits are part of total compensation. When CVS Caremark inflates drug costs and diverts rebates, it reduces the purchasing power of those benefits. The union negotiated for a certain level of healthcare coverage. CVS Caremark delivered less coverage at a higher cost and pocketed the difference.

The “Cost of a Life” Metric

What Now?