If you have been following the news around CVS Caremark, you know this story is a big one. A federal judge has ordered the pharmacy benefit manager, which is part of CVS Health, to pay almost $290 million in damages and penalties. The case goes back to 2013 and 2014 when Caremark was accused of overcharging Medicare Part D for prescription drug costs.
The allegations came from Sarah Behnke, a former actuary at Aetna, who stepped forward as a whistleblower. She claimed Caremark manipulated drug cost reports, causing Medicare to be billed much more than it should have been. This fraud has cost taxpayers about $95 million according to the report from the court.
How did the medicare fraud scheme work?
You might be wondering how exactly this scheme worked. Court documents explained that Caremark was accused of manipulating how drug costs were reported. This led Aetna and SilverScript, two health insurance plans, to submit false data to Medicare.
Here is what the scheme involved:
- Caremark allegedly changed the way it reported drug costs.
- These changes led to false reports being submitted to Medicare.
- The false numbers inflated costs, which caused Medicare to be overbilled.
- The total overcharge came to $95 million for the years 2013 and 2014.
Judge Mitchell Goldberg, who handled the case, said while he did not find “actual knowledge” of fraud, Caremark showed “reckless disregard and deliberate ignorance.” That was enough for the court to apply steep penalties.
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Why did the fine reach nearly $290 million?
The original damages were set at $95 million, but the judge tripled that amount, bringing it to $289.9 million. On top of that, he added $4.87 million in civil penalties.
Why so high? The judge explained that the scale of the fraud was significant, and the penalties needed to reflect that. He also pointed out that the ratio of penalties to actual damages was lower than in other past fraud cases, meaning it did not violate due process.
In short, the fine was meant to send a clear message that manipulating Medicare reporting will not be tolerated.
How did CVS respond to the ruling?
CVS Health issued a statement after the ruling, saying, “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.”
This shows that CVS Caremark is not accepting the judgment quietly. The company has made it clear they plan to challenge the ruling in higher courts.
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What does this mean for medicare and taxpayers?
Cases like this are important because they show how fraud in reporting can affect Medicare, which is funded by taxpayers. When these companies inflate costs, it is you and every other taxpayer that ends up paying the price.
This case highlights:
- The importance of reporting accurate drug cost.
- The risks when big corporations manage Medicare benefits.
- The role of whistleblowers in uncovering fraud.
In fact, without Sarah Behnke stepping forward, this case might never have come to light. Whistleblowers often play a critical role in protecting public funds.
What happens next for CVS caremark?
Right now, CVS Caremark is facing interest charges on the $289.9 million judgment until it is paid in full. That means the total amount they owe will continue to grow until the payment is made.
The company has already said it plans to appeal, so the legal battle is not over yet. However, unless a higher court changes the ruling, Caremark will be responsible for paying nearly $290 million.
For many observers, this case is another reminder that the healthcare industry is under close watch, and mistakes—or worse, intentional fraud—can carry very high costs.
