CVS Caremark Loses Fraud Case, Ordered to Pay $290 Million in Medicare Overcharge Scandal

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A Florida man is suing Publix, CVS Pharmacy, and Costco pharmacies, along with their pharmacists, claiming that Adderall prescriptions from them caused a severe psychotic episode. Spencer Platt/Getty Images

A federal court has ordered CVS Health's pharmacy benefit arm, Caremark, to pay close to $290 million after determining the company had overbilled Medicare for prescription drugs more than ten years ago.

The ruling comes after a long-running whistleblower lawsuit that accused the company of filing false cost reports.

The case was brought forward by Sarah Behnke, a former Aetna actuary, who alleged that Caremark manipulated how drug costs were reported in 2013 and 2014.

According to her claims, the company's actions caused Aetna and SilverScript to submit false drug price data to Medicare Part D, resulting in an overbilling of $95 million.

In Philadelphia federal court, Chief Judge Mitchell Goldberg ruled that Caremark was responsible for violating the False Claims Act.

According to FoxBusiness, the judge increased the damages threefold, pointing to Caremark's reckless disregard and willful ignorance, which brought the amount to $289.9 million. On top of that, civil penalties of about $4.87 million were added.

"CMS relies on companies like Caremark to truthfully and accurately report Part D drug prices," Judge Goldberg wrote in his decision. "Caremark's conduct broke CMS's trust, and as a result, the public's trust in CMS."

CVS Caremark Hit With $289.9M Fraud Penalty, Plans Appeal

While Goldberg did not find that Caremark had "actual knowledge" of the fraud, he ruled that the company's disregard for accuracy warranted steep financial penalties.

The judgment also included post-judgment interest, meaning interest on the $289.9 million began accruing immediately and will continue until the company pays in full.

CVS responded by saying it was pleased with certain rulings in its favor but "disappointed" with the decision against Caremark. The company confirmed it plans to appeal the judgment.

Behnke first filed her whistleblower complaint in 2014, several years before CVS acquired Aetna in 2018.

Under the False Claims Act, whistleblowers can receive between 15% and 30% of the recovery, though it is not yet clear how much Behnke will ultimately receive, Reuters said.

Caremark had argued that penalties should not exceed the $95 million in damages, claiming higher fines would violate the US Constitution's protections against excessive punishment. Judge Goldberg disagreed, citing a 2003 Supreme Court ruling that supported the proportionality of his decision.

The case marks the second major legal setback for CVS this summer. Just last month, a Manhattan federal judge ordered Omnicare, another CVS unit, to pay nearly $949 million in a separate whistleblower case involving alleged fraudulent billing.

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