Caremark to Pay $4.25 to Settle Whistleblower Claim Filed Under the Qui Tam Provisions of the False Claims Act

Caremark LLC, operated by CVS Caremark Corp., has agreed to settle a whistleblower claim filed under the qui tam provisions of the federal False Claims Act. Caremark is one of the largest pharmacy benefit management (“PBM”) companies in the U.S. CVS is one of the largest retail pharmacies in the country.

A PBM is usually a third party entity that administers a prescription medication program. Integrated healthcare systems, such as Kaiser Permanente and the Veterans Administration, typically have internal PBM departments. PBM’s process and paying prescription drug claims. In addition, PBM’s develop and maintain the list of prescription drugs that will be covered, establish pharmacy contracts, and negotiate discounts and rebates with drug manufacturers.

According to the Justice Department, the qui tam complaint was filed in 2012 and alleged that Caremark caused Medicaid to pay for prescription drug costs that it knew should have been paid by Caremark-administered private prescription drug plans. The False Claims Act litigation was brought by whistleblower Janaki Ramadoss, a former quality assurance representative for Caremark.

Caremark was the PBM for private healthcare plans that insured a number of individuals who received prescription drug benefits from Medicaid and from private plans administered by Caremark. The costs of health care for these “dual eligible” individuals must be borne by the private insurer under the law. If Medicaid mistakenly pays prescription costs for a dual eligible beneficiary, Medicaid is entitled to be reimbursed by the private insurer.

According to the whistleblower, Caremark used a computer claims processing platform to cancel the reimbursement prescription drug claims submitted by Medicaid. The whistleblower alleged that Caremark knowingly caused Medicaid to incur the costs of prescription drugs for individuals who also had private prescription drug coverage.

Caremark has agreed to settle the qui tam complaint for $4.25 million. The federal government will receive $2.31 million of the settlement amount and five states, Arkansas, California, Delaware, Louisiana, and Massachusetts, will share in the remaining $1.94 million. The whistleblower will receive approximately $505,680 of the settlement proceeds as a reward under the qui tam provisions of the False Claims Act.

For more information on whistleblower, False Claims Act, and qui tam cases, click here.