A federal judge has ordered CVS Health’s pharmacy benefit manager, Caremark, to pay nearly $290 million after a whistleblower accused the business of overcharging Medicare on prescription drugs more than a decade ago.
Sarah Behnke, a former Aetna actuary, alleged Caremark defrauded Medicare Part D by causing false drug cost reports to be submitted in 2013 and 2014.
Caremark was found liable in June and Philadelphia federal court Chief Judge Mitchell Goldberg ordered the company to pay $95 million in damages, deferring final rulings on penalties.
Goldberg, who was appointed by former President George W. Bush, tripled the damages on Tuesday, finding Caremark Rx, CaremarkPCS Health and CVS Caremark Part D Services should pay a total of $289.9 million in damages and penalties, according to court documents. Goldberg also imposed $4.87 million in civil penalties.
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“We are pleased that the Behnke ruling in June was in our favor as to certain issues for CVS Pharmacy and CVS Health Corporation’s liability, and disappointed the Court found against Caremark on other issues. We plan to appeal,” CVS wrote in a statement to FOX Business.
In 2014, Caremark was accused of manipulating how drug costs were reported, causing Aetna and SilverScript to submit false direct and indirect remuneration reports in 2013 and 2014, according to court records.
The scheme, which was allegedly designed to hide profits, led to Medicare Part D being overbilled by $95 million.
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While Goldberg did not find “actual knowledge” of the fraud, he found reckless disregard and deliberate ignorance warranting the steep penalties, according to a memorandum.
Caremark argued that the 513 false reports submitted did not justify penalties exceeding the $95 million overcharged, citing the excessive fines clause of the Eighth Amendment and the due process clause.
However, Goldberg found a $95 million fraud loss was “certainly significant.”
Citing precedent from a State Farm insurance case in 2003, Goldberg noted due process was not violated because the ratio of penalties to actual damages was substantially lower than previous decisions, according to court documents.
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Goldberg also awarded post-judgment interest, which means interest began accruing on the total $289.9 million on Tuesday, and will continue to accrue until Caremark pays in full.
The interest will compensate Behnke and the government until CVS pays fully, preventing the company from delaying action.
It is unclear how much of the total award Behnke will receive.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| CVS | CVS HEALTH CORP. | 70.82 | -0.15 | -0.21% |
Aetna, Sarah Behnke and U.S. Attorney David Metcalf did not immediately respond to FOX Business’ requests for comment.
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