In November 2021, US pharmaceutical giant CVS announced a $10 million commitment to the American Diabetes Association (ADA) to be delivered over three years. Introducing its pledge, CVS’s social responsibility team said the donations would support families dealing with diabetes and fund research to eradicate health disparities. The company also said it would “host an in-store fundraising campaign at all CVS Pharmacy locations nationwide during National Diabetes Month to give customers an opportunity to support the ADA.”
What CVS omitted, according to a lawsuit (pdf) filed earlier this year in federal court in New York, is that the donations collected from customers through in-store fundraising weren’t going to be in addition to the initial pledge. Rather, they would be used in lieu of donations coming from CVS’s coffers.
Customers subsidized CVS’s generosity
The complaint, which was brought by Kevin McCabe, a New York state resident who donated to CVS’s in-store ADA campaign, says that between Nov. 2 and Nov. 27, 2021 (pdf, p.2), thousands of CVS customers were asked at checkout whether they wanted to add a donation to the ADA on top of their transaction amounts. Customers could select an amount, or decide not to donate. They weren’t offered further context about their donations.
According to the complaint, “CVS did not merely collect customers’ Campaign Donations and forward them to the ADA, but, instead, counted Campaign Donations toward the satisfaction of a legally binding obligation, which CVS had made to the ADA, to donate $10 million to the ADA during the three year period of 2021 through 2023.”
In other words, it appears customers unknowingly subsidized CVS’s charity promises.
The lawsuit, which is seeking class-action status, claims that by failing to disclose the exact way in which the funds raised would be used, CVS committed fraud. It asks for compensation according to state laws, which would vary from $100 statutory damages for potential class members in Alabama to $5,000 for Michigan class members, and $10,000 to Kansas members.
License to fundraise
“The claims asserted in this action lack merit and we have filed a motion to dismiss that details the plaintiff’s inaccurate description of our campaign and its intent,” Mike DeAngelis, a spokesperson for CVS, told Quartz via email.
According to the company, CVS never committed to a $10 million corporate donation, but planned to fundraise among its customers instead. The company said it only agreed to add enough to the customer donations to meet the $10 million total commitment. “Obviously, upon signing, CVS did not assume an unconditional $10 million debt to the ADA,” CVS said.
However, Todd Bank, the lawyer representing McCabe, says that the contract between CVS and the ADA (which was attached by CVS to the dismissal request) confirms that the drugstore chain would have had to pay $10 million to ADA had it not collected any customer donations.
The ethics question
Whether or not CVS was obliged to pay doesn’t really address a key point—moral, if not strictly legal—of the complaint: CVS didn’t inform its customers that their donations were part of a pledge the company had already made. That may not be fraud, but it is less than transparent.
It’s also not clear whether there were specific milestones in place for donations over the three years, or what would happen if in-store donations were to surpass $10 million. CVS and ADA did not immediately reply to requests to clarify these questions.
According to its website, CVS is involved in several other partnerships with health organizations. A few of them, including to the Alzheimer Association, the American Cancer Society, and the American Heart Association, include donation pledges based on in-store fundraising.
The ADA for its part confirmed it is receiving the proceeds of in-store donations made by CVS customers at the retailer’s checkout registers. The nonprofit was not named in the lawsuit and was not accused of any wrongdoing.
More from Quartz