CVS Health Faces $290 Million Penalty for Medicare Fraud

A federal judge has ordered CVS Health’s pharmacy benefit manager, Caremark, to pay nearly $290 million following allegations of fraud against Medicare related to prescription drug overcharges. The ruling stems from a whistleblower case initiated by Sarah Behnke, a former actuary for Aetna, who claimed that Caremark submitted false drug cost reports to Medicare Part D in 2013 and 2014.

The case was presided over by Chief Judge Mitchell Goldberg of the Philadelphia federal court, who found Caremark liable for its actions in June 2023. Initially, Goldberg ordered the company to pay $95 million in damages, but on Tuesday, he significantly increased the total penalties to $289.9 million after determining that Caremark’s conduct warranted further financial repercussions.

In his ruling, Goldberg imposed an additional $4.87 million in civil penalties, citing Caremark’s reckless disregard and deliberate ignorance concerning the fraudulent activities. Although the judge did not find “actual knowledge” of the fraud, he emphasized the severity of Caremark’s actions, which allegedly resulted in Medicare Part D being overbilled by $95 million.

Caremark argued against the penalties, contending that the 513 false reports submitted did not justify the amount exceeding the original $95 million. The company referenced the excessive fines clause of the Eighth Amendment and the due process clause in its defense. However, Goldberg countered that the fraud loss was “certainly significant,” and noted that the ratio of penalties to actual damages was in line with previous legal precedents.

The judge also awarded post-judgment interest, meaning that interest on the total amount of $289.9 million will begin accruing immediately and will continue until Caremark settles the payment in full. This measure aims to ensure that the government and Behnke are compensated without undue delay.

CVS Health expressed mixed feelings regarding the ruling. In a statement to FOX Business, the company indicated satisfaction with some aspects of the June ruling while expressing disappointment over the findings against Caremark. The company plans to appeal the decision.

As for Behnke, it remains unclear how much of the awarded total she will receive. Aetna, Behnke, and U.S. Attorney David Metcalf did not respond immediately to requests for comment on the developments.

This case highlights ongoing concerns about the integrity of pharmacy benefit managers and their interactions with government healthcare programs. The penalties imposed on Caremark reflect the judiciary’s commitment to holding corporations accountable for fraudulent practices that undermine taxpayer-funded systems.