CVS Caremark: $95M Medicare Fraud Settlement
- CVS Caremark, a pharmacy benefit manager (PBM), must pay $95 million after a federal judge ruled the company overcharged medicare for generic prescription drugs.
- The case originated from a 2014 whistleblower lawsuit filed by Sarah Behnke, a former actuary for Aetna, a CVS insurance subsidiary.
- At the heart of the lawsuit was Caremark's pricing arrangements with insurers and pharmacies.
CVS Caremark faces a $95 million penalty for overcharging Medicare, a major development in the ongoing scrutiny of pharmacy benefit managers. A federal judge found that the CVS subsidiary inflated drug prices, impacting Medicare Part D and violating the False Claims Act. This stems from a whistleblower lawsuit alleging misrepresented generic drug prices, highlighting the impact of spread pricing. The case underscores the importance of regulation in the pharmaceutical industry.News Directory 3 provides breaking coverage of this significant Medicare fraud settlement, revealing potential future financial exposure for CVS. Explore the details of the case, the legal arguments, and the implications of this ruling. Discover what’s next …
CVS Caremark to Pay $95M for Medicare Overbilling Penalty
CVS Caremark, a pharmacy benefit manager (PBM), must pay $95 million after a federal judge ruled the company overcharged medicare for generic prescription drugs. The ruling, delivered by Judge Mitchell Goldberg in the Eastern District of Pennsylvania, found that Caremark inflated drug prices to offset other costs, impacting Medicare Part D.
The case originated from a 2014 whistleblower lawsuit filed by Sarah Behnke, a former actuary for Aetna, a CVS insurance subsidiary. Behnke alleged that Caremark violated the false claims Act by knowingly overcharging the government.The Justice Department initially declined to intervene, and the case remained sealed until 2018.
At the heart of the lawsuit was Caremark’s pricing arrangements with insurers and pharmacies. PBMs like Caremark act as intermediaries, negotiating drug costs. The lawsuit alleged that Caremark misrepresented generic drug prices between 2010 and 2016, leading to inflated costs for Medicare.
Judge Goldberg stated, “Caremark knew that the more it paid for Part D drugs, the less it had to pay for commercial drugs. Caremark knew if it paid less on commercial drugs, it could earn more spread.” This “spread pricing” technique allowed Caremark to profit from the difference between what insurers paid and what pharmacies charged.
While the $95 million penalty is critically important,Caremark’s financial exposure could increase. Goldberg has yet to rule on civil penalties and the number of false claims involved. Under the False Claims Act, CVS could be liable for triple the government’s damages, plus an inflation-adjusted penalty.
What’s next
Opening briefs regarding further damages are due July 9. The case highlights ongoing scrutiny of pharmacy benefit managers and their impact on prescription drug prices. Several states,including Iowa,Texas,georgia,Indiana,and Montana,have recently passed laws restricting PBM practices.