CVS’ Caremark Will Pay $4.25 Million for Allegedly Denying Medicaid Claims for Reimbursement of Prescription Drug Costs

Washington, DC - Caremark LLC, a pharmacy benefit management company (PBM), will pay the government and five states a total of $4.25 million to settle allegations that it knowingly failed to reimburse Medicaid for prescription drug costs paid on behalf of Medicaid beneficiaries, who also were eligible for drug benefits under Caremark-administered private health plans, the Justice Department announced today. 

Caremark is operated by CVS Caremark Corp., one of the largest PBMs and retail pharmacies in the country.  A PBM administers and manages the drug benefits for clients who offer drug benefits under a health insurance plan. 

Under the terms of the agreement, the government will receive approximately $2.31 million.  In addition, five states -- Arkansas, California, Delaware, Louisiana and Massachusetts -- will share $1.94 million. 

“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 F. Delery.  “We will take action against those who seek to gain at the expense of Medicaid or other federal health care programs.”

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 called a “dual eligible.”  Under the law, the private insurer, rather than the government, must assume the costs of health care for dual eligibles.  If Medicaid erroneously pays for the prescription claim of a dual eligible, Medicaid is entitled to seek reimbursement from the private insurer or its PBM, in this case Caremark. 

  According to the government, Caremark allegedly used a computer claims processing platform called “Quantum Leap” to cancel claims for reimbursement submitted by Medicaid for dual eligibles.  The government alleged that Caremark’s actions 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 Medicaid.

The allegations settled today arose from a lawsuit filed by Janaki Ramadoss, a former Caremark quality assurance representative, under the qui tam, or whistleblower, provisions of the False Claims Act.  Under the Act, private citizens can bring suit on behalf of the government for false claims and share in any recovery.  The Act also allows the government to intervene in the lawsuit, as it has done in this case.  Ramadoss will receive approximately $505,680 from the federal government’s share of the settlement.  Ramadoss also will receive additional amounts from the settling states. 

This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Health and Human Services Secretary Kathleen Sebelius.  The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation.  One of the most powerful tools in this effort is the False Claims Act.  Since January 2009, the Justice Department has recovered a total of more than $17 billion through False Claims Act cases, with more than $12.1 billion of that amount recovered in cases involving fraud against federal health care programs.

This case was jointly litigated by the U.S. Attorney’s Office for the Western District of
Texas; the Justice Department’s Civil Division, Commercial Litigation Branch; and the attorneys general for the states of Arkansas, California and Louisiana.

The case is captioned United States ex rel. Ramadoss v. CVS Caremark Inc., SA-12-CA-929WRF (W.D. Texas).  The claims settled by this agreement are allegations only; there has been no determination of liability.

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