Judge lets Zepbound formulary lawsuit against CVS Caremark proceed
A New York judge is letting an ERISA case proceed that asks whether a pharmacy benefit manager's own rebate revenue drove Zepbound coverage denials.
A federal judge in New York is allowing part of a lawsuit to move forward that accuses CVS Caremark of removing Zepbound from its preferred drug lists in favor of a competing weight-loss drug after signing a rebate agreement with that drug's maker [2]. In an order dated August 26, 2026, Judge Louis L. Stanton denied Caremark's motion to compel arbitration and granted its motion to dismiss only in part [1].
The case, Larkin et al. v. Caremark RX, L.L.C., is pending in the U.S. District Court for the Southern District of New York [1]. The plaintiffs, Dennis Larkin and Danielle Gosline, are beneficiaries of employer health plans sponsored by Publicis, Inc. and Hillside Children's Center, where CVS Caremark serves as the pharmacy benefit manager, or PBM [1]. They sued on behalf of themselves and others in similar situations under ERISA, the federal law that governs employer-sponsored health plans, alleging breach of fiduciary duty and prohibited transactions [1].
Both were prescribed Zepbound, a tirzepatide drug, by their physicians and had coverage through CVS Caremark until the summer of 2025 [1]. Larkin used Zepbound for obesity and sleep apnea; his coverage was first denied on June 19, 2025, and denied twice more on appeal, which exhausted his administrative appeals [1]. Gosline used Zepbound for obesity after trying other medications that caused intolerable side effects; her coverage was first denied on July 1, 2025, and one appeal was denied, which CVS Caremark said exhausted her appeals because her request was deemed urgent [1].
The plaintiffs allege that CVS Caremark or its parent company, CVS Health Corporation, entered a rebate agreement with Novo Nordisk, the maker of Wegovy, a semaglutide, on or around May 1, 2025, under which CVS Caremark favors Wegovy and earns rebates on its sales [1]. Zepbound was removed from its formularies effective July 1, 2025, according to the complaint [1]. The plaintiffs also allege the alternatives they were offered, Wegovy and Mounjaro, which is also tirzepatide, did not meet their plans' coverage requirements [1]. They allege the formulary removal and the later denials violated CVS Caremark's fiduciary duty of loyalty and the terms of their plans [1].
Stanton found the plaintiffs validly alleged that Caremark flouted plan terms when denying coverage and engaged in self-dealing by making coverage decisions based on its own financial interest, Bloomberg Law reported [2]. Caremark has said it is merely the parent company of the plans' actual PBM, CaremarkPCS Health, L.L.C., and was not involved in deciding the plaintiffs' claims [1].
On arbitration, the plan documents themselves contain no arbitration provision; the clause Caremark sought to enforce appears in the terms of its Caremark.com website and mobile app, which both plaintiffs accepted by creating accounts in 2024 and continuing to use them in 2025 [1]. The court found Caremark met its initial burden of showing an arbitration agreement existed and that the word "affiliates" in those terms can include a parent company, but denied the motion [1].
Why it matters for patients
PBMs design the formularies that determine which drugs an employer plan covers and on what terms, and they sometimes negotiate rebates with drugmakers in exchange for favoring a brand [1]. This order does not change anyone's coverage, and it does not decide whether the allegations are true. It means the case survives a stage where many similar suits end, and the central question — whether a PBM's own rebate revenue can drive coverage denials under ERISA — has not been decided on the merits [1][2]. The claims at issue apply to employer-sponsored plans covered by ERISA, not to plans outside that system. For people in such plans that use CVS Caremark, plan terms and the plan's appeal process still govern whether a drug is covered [1].
What happens next
The plaintiffs have until September 25, 2026 to submit an amended complaint [1]. No class certification decision, trial date or ruling on the merits of the claims has been reported [1][2].
Sources
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