CVS Caremark Ordered to Pay Nearly $290 Million Over Fraud

A federal court has ordered CVS Health’s pharmacy benefit manager, Caremark, to pay nearly $290 million following allegations of defrauding Medicare. The ruling stems from claims made by whistleblower Sarah Behnke, a former actuary at Aetna, who accused Caremark of overcharging Medicare for prescription drugs over ten years ago.

In a decision announced by Chief Judge Mitchell Goldberg in a Philadelphia federal court, Caremark was found liable for submitting false drug cost reports in 2013 and 2014. The initial judgment, issued in June, required Caremark to pay $95 million in damages, but on Tuesday, Judge Goldberg increased the total financial penalty to $289.9 million. This figure includes $4.87 million in civil penalties, reflecting the severity of the violations.

Behnke’s allegations highlighted that Caremark manipulated how drug costs were reported, leading Aetna and SilverScript to submit erroneous direct and indirect remuneration reports. The fraudulent scheme reportedly resulted in Medicare Part D being overbilled by an estimated $95 million. While Judge Goldberg did not find “actual knowledge” of the fraud within Caremark, he noted a pattern of “reckless disregard” and “deliberate ignorance,” which justified the substantial penalties.

CVS issued a statement expressing its disappointment over the ruling against Caremark, asserting that it plans to appeal the decision. The company emphasized that certain aspects of the ruling were favorable to CVS Pharmacy and CVS Health Corporation.

Judge Goldberg’s ruling highlighted the significance of the fraud loss, stating that the $95 million overcharge was “certainly significant.” He referenced a precedent from a 2003 State Farm insurance case to reinforce that the penalties imposed were not excessive in relation to the actual damages incurred.

As part of the judgment, post-judgment interest will accrue on the $289.9 million total from the date of the ruling, which means the amount will continue to grow until Caremark fulfills the payment. This interest serves to compensate Behnke and the government, ensuring that CVS cannot delay the financial repercussions of the court’s decision.

At present, it remains unclear how much of the total award Sarah Behnke will ultimately receive. Requests for comments from Aetna, Behnke, and U.S. Attorney David Metcalf went unanswered.

This ruling underscores ongoing scrutiny of pharmacy benefit managers and their practices, as regulators and the public increasingly demand transparency in prescription drug pricing and reimbursement processes.