Consumer Fraud

CVS agrees to pay $4.25 million to settle whistleblower’s fraud allegations

osha whistle CVS agrees to pay $4.25 million to settle whistleblower’s fraud allegationsA lawsuit filed under the federal False Claims Act against CVS Caremark Corp. has resulted in a $4.25-million settlement to resolve a whistleblower’s allegations that the company knowingly defrauded federal and state Medicaid programs by failing to reimburse the taxpayer-funded programs for drug expenses that should have been paid by the private insurer.

Under the terms of the agreement, the federal government will receive $2.31 million. Five states that joined the lawsuit – Arkansas, California, Delaware, Louisiana and Massachusetts – will share $1.94 million. Texas also joined the lawsuit but settled the allegations separately.

CVS Caremark is one of the largest pharmacy benefit management (PBM) companies and retail pharmacies in the nation. PBMs administer and manage drug benefits for clients that provide private health insurance plans with drug benefits.

Caremark served as the PBM for private health plans that insured a number of individuals receiving prescription drug benefits under both a Caremark-administered plan and Medicaid.  When an individual is covered by both Medicaid and a private health plan, the individual is deemed a “dual eligible.”

U.S. law mandates that the private insurer, rather than the government, must assume the costs of health care for dual eligible patients.  If Medicaid erroneously pays for the prescription claim of a dual eligible, the program is entitled to seek reimbursement from the private insurer or its PBM.

According to the whistleblower lawsuit, Caremark allegedly canceled claims submitted by Medicaid for reimbursement for dual eligible patients by using a special computer claims processing platform. This action, the government alleges, caused Medicaid to incur prescription drug costs for dual eligible patients  that should have been paid for by the Caremark-administered private health plans rather than Medicaid.

Janaki Ramadoss, a former Caremark quality assurance representative, filed lawsuit under the qui tam (“whistleblower”) provisions of the False Claims Act, which allow private individuals to sue on behalf of the U.S. government when they have witnessed fraud, waste, abuse, and other wrongdoing. In exchange for their role in exposing fraud, FCA whistleblowers receive up to 30 percent of the recovery. Ms. Ramadoss will receive approximately $505,680 plus additional amounts from each of the states that joined the lawsuit.

“It is vitally important that cash-strapped Medicaid programs receive reimbursement for costs they incur that should have been paid for by other insurers,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart Delery.  “We will take action against those who seek to gain at the expense of Medicaid or other federal health care programs.”


U.S. Justice Department