Caremark dealt a $95 million blow for violating the False Claims Act
CVS Health’s pharmacy benefits manager Caremark has been slapped with a $95 million judgement for violating the False Claims Act.
In a decision issued Wednesday, a judge ruled that Caremark had persuaded insurers to intentionally mislead the government regarding prescription drug prices for Medicare beneficiaries. The plaintiff, a former Aetna actuary in the Medicare department, accused Caremark of inflating prices during negotiations, causing the government to be overcharged for drugs for Medicare patients.
They were able to get away with this due to Caremark’s contracts with CVS pharmacies not having generic effective rate (GER) guarantees to ensure that drug prices stay within a certain range over the period of one year. Instead, Caremark had a budgeted GER, which larger companies often use for internal planning and adjustments throughout the year.
Budgeted GERs can change throughout the year and do not require pharmacy benefits managers to pay back pharmacies that were underpaid for medications. This enabled Caremark to charge the maximum amount for commercial drugs, rather than a set, fixed price, without having worry about claw backs for underpayment.
“The evidence does not show that CVS Pharmacy and Caremark engaged in some arms-length negotiation or bargaining,” the judge said in the ruling. “Rather, it is more consistent with a parent company—CVS Health—listening to each subsidiary’s position and then implementing a budgeted GER aimed at benefiting the company as a whole.
SilverScript (a CVS-owned insurance plan), Walgreens and Rite Aid were also named in the lawsuit, though Caremark was the primary focus.
This isn’t the only legal blow that CVS has been dealt this month. Earlier in June, a law firm in Louisiana filed a class-action lawsuit against CVS Health over its use of text messaging to alert customers to an upcoming vote on legislation that the company believed would negatively impact its business. In their court filing, the plaintiffs alleged that the direct-to-patient marketing is a misuse of patient data and violates the law, calling it “political manipulation.”
CVS has denied any wrongdoing in the text messaging matter.
In addition to her background in journalism, Hannah also has patient-facing experience in clinical settings, having spent more than 12 years working as a registered rad tech. She began covering the medical imaging industry for Innovate Healthcare in 2021.