Four states joined a federal lawsuit against CVS Pharmacy that claims the company caused state Medicaid programs to pay higher prices than non-Medicaid payers for prescription drugs. The states joining the lawsuit are Connecticut, Massachusetts, Indiana and Oklahoma.

According to the lawsuit, CVS offered lower drug prices to cash-paying customers through a third-party discount program called ScriptSave. The complaint alleges that CVS contracted with ScriptSave to administer discount card programs for former customers of CVS’s discount card program, Health Savings Pass, and at former Target pharmacies, which CVS acquired. Customers with those ScriptSave discount cards often received lower prices than Medicaid customers.

State regulations require pharmacies to offer Medicaid the lowest discount program price. For example, MassHealth has had a “Most Favored Nation” drug pricing regulation since 1995 that entitles it to the lowest prices CVS charges or accepts from other payors. Connecticut changed its laws to explicitly clarify that a pharmacy must bill Medicaid its lowest discount program price after some pharmacies began offering loyalty and discount programs on a membership basis starting around 2010.

“When pharmacies offer discounted drug pricing to customers, they must also charge MassHealth that same low price,” Massachusetts Attorney General Andrea Joy Campbell said in a statement. “At a time when costs are sky-high, our taxpayers should not have to foot the bill for pharmacies’ inaccurate price reporting.”

CVS disputed the claims in a statement saying, “We’ve always been transparent with Medicaid programs concerning the prices we were submitting. The four states involved in this lawsuit have never issued guidance to pharmacies contending that third-party discount card prices constitute a pharmacy’s usual & customary prices.”

The lawsuit follows a whistleblower complaint filed in the United States District Court for the District of Columbia.