Consumer Fraud

The Fraud List: CVS Caremark profits from Medicaid fraud

the fraud list 370x210 The Fraud List: CVS Caremark profits from Medicaid fraudCVS Caremark is the pharmacy benefit management and drugs-by-mail division of CVS Health, a Woonsocket, R.I., based company currently ranked by Fortune Global 500 as the 35th largest corporation in the world in terms of revenue.

As both the owner of nearly 70,000 retail pharmacies and the manager of pharmacy services for thousands of clients, the CVS family of companies is well positioned to make enormous profits in the health care field. The corporation manages pharmacy benefit services for employers, health insurance companies, unions, government employee groups, managed care organizations, and other health care plan providers throughout the U.S.

CVS Caremark, like other pharmacy and pharmacies and pharmacy benefit companies, relies on Medicare and Medicaid reimbursements for a hefty portion of its revenues. In fact, more and more False Claims Act whistleblower lawsuits are taking aim at pharmacies and pharmacy benefit managers, including CVS Caremark, accusing these “middlemen” companies of defrauding taxpayer-funded health care programs through improper billing practices and other illegal activities.

CVS Caremark has settled four False Claims Act cases in less than seven years, all of them involving allegations of improper billing practices defrauding Medicaid.

Dodging Medicaid reimbursement

In September of last year, CVS Caremark agreed to pay the U.S. $6 million to settle allegations brought by Donald Well, a former Caremark employee, under the qui tam provisions of the False Claims Act.  Mr. Wells alleged that CVS Caremark knowingly defrauded federal and state Medicaid programs by failing to reimburse them for drug expenses that should have been covered by a private insurer.

Individuals who are covered by both Medicaid and a supplementary private health plan are classified as “dual eligible.” U.S. law mandates that the private insurer, rather than taxpayer-funded government programs, assume the costs of health care for dual eligible beneficiaries.

Should Medicaid erroneously pay for the prescription claim of a dual eligible individual, the program is entitled to seek reimbursement from the private insurer or its pharmacy benefit manager, which administers and manages drug benefits for clients.

According to the complaint, CVS Caremark served as the pharmacy benefit manager for private health plans that insured a number of individuals receiving prescription drug benefits under both a Caremark-administered plan and Medicaid.

The complaint alleges that Caremark’s computer system failed to pay the full amount due on certain claims because it improperly deducted certain co-payment or deductible amounts when calculating payments, causing Medicaid to incur prescription drug costs for dual eligibles that should have been paid for by the Caremark-administered private health plans.

Incredibly, just nine months before CVS Caremark settled Mr. Wells’ False Claims Act allegations, it settled another whistleblower case that also accused the company of improperly billing Medicaid for dual eligible Medicaid recipients.

Former Caremark quality assurance representative Janaki Ramadoss alleged in her whistleblower complaint that Caremark used a computer claims processing platform called “Quantum Leap” to systematically cancel claims for reimbursement submitted by Medicaid for dual eligible beneficiaries.

This system caused Medicaid to incur prescription drug costs for dual eligibles that should have been paid for by the Caremark-administered private health plans, rather than by Medicaid.

CVS Caremark agreed to pay $4.25 million to the U.S. to settle the allegations. Under the terms of the agreement, the federal government received $2.31 million of the settlement and awarded Ms. Ramadoss $505,680 (11 percent) from its share of the recovery. Five states – Arkansas, California, Delaware, Louisiana, and Massachusetts – shared the remaining $1.94 million.

In April of 2011, CVS Pharmacy Inc., the retail pharmacy division of CVS Caremark, settled allegations of Medicaid fraud when it agreed to pay the U.S. and 10 states $17.5 million.

The allegations stemmed from a False Claims Act lawsuit filed by Stephani LeFlore, a CVS pharmacist in St. Paul, Minn. Ms. LeFlore, the U.S. government and the participating states accused CVS of submitting false, inflated prescription drug claims to the government.

The U.S. Justice Department said that CVS billed the Medicaid programs in Alabama, California, Florida, Indiana, Massachusetts, Michigan, Minnesota, New Hampshire, Nevada, and Rhode Island for more than CVS was owed. The drugs were dispensed to Medicaid beneficiaries, many of whom were also eligible for benefits under a private insurer other than Medicare.

Rather than billing the government for whatever amount the insured beneficiary would have had to pay had the claims been submitted solely to the private insurer, CVS billed Medicaid the inflated amount and thus received bigger Medicaid reimbursements.

CVS paid $17.5 million to resolve the whistleblower complaint. The federal government received nearly $8 million of the recovery and the remaining $9.5 million was divided between the participating states.

The agreement also required CVS to enter a three-year Corporate Integrity Agreement with the Department of Health and Human Services. Under the agreement, the Health and Human Services Office of the Inspector General monitored the company’s implementation of new, accurate billing procedures and the training of employees. The agreement also called required regular audits of CVS’s compliance by an independent monitor.

The big switch

In December 2008, CVS Caremark paid $36.7 million to resolve allegations of Medicaid fraud in a lawsuit filed by Bernard Lisitza, a former CVS pharmacist who processed prescriptions, and the U.S. government, which investigated and joined the False Claims Act suit. Twenty-three states opted to join the lawsuit as well.

Mr. Lisitza and the U.S. alleged that CVS pharmacies switched Medicaid patients taking ranitidine, the generic form of the heartburn/stomach acid drug Zantac, from tablets to capsules to get more money from Medicaid, which sets maximum reimbursement rates for the tablet form of the drug but not for capsules.

Ranitidine capsules cost significantly more than the tablets did at the time of the alleged scheme, which the plaintiffs said took place from April 1, 1999, to Dec. 31, 2006. The switch allowed CVS to receive four times more in reimbursements from Medicaid than it would have received by keeping Medicaid beneficiaries on the more affordable tablet form of the drug.

Mr. Lisitza received a $4.3-million share of the recovery. It should be noted that Mr. Lisistza also filed a whistleblower complaint against Omnicare Inc., the largest Pharmacy Benefit Management corporation in the U.S. and another repeat offender on The Fraud List. Mr. Lisitza alleged Omnicare, like CVS, switched patients to more expensive forms of drugs simply to increase government reimbursements. Omnicare settled the complaint in 2006 by agreeing to pay the U.S. and 43 states $49.5 million.

Coming Up Next:

Next week’s installment of The Fraud List will feature another repeat offender of the False Claims Act, Pfizer. A new story in this series will be published each Thursday. Follow #thefraudlist on Google+, Facebook and Twitter.


Chicago Tribune

Righting Injustice: CVS Caremark To Pay $6 Million To Settle Whistleblower Allegations Of Medicaid False Claims

Taxpayers Against Fraud

The Consumerist

Fierce Healthcare


U.S. Department of Justice: Lisitza v. Johnson & Johnson

U.S. Department of Justice: Caremark Will Pay $6 Million to Resolve False Claims Act Allegations

U.S. Department of Justice: CVS’ Caremark Will Pay $4.25 Million for Allegedly Denying Medicaid Claims for Reimbursement of Prescription Drug Costs

U.S Department of Justice: CVS Subsidiary, RxAmerica, Reaches $5 Million Settlement with US for Allegedly Submitting False Pricing Relating to the Company’s Medicare Part D Plan

AIS Health

Beasley Allen

U.S. Drug Enforcement Administration