CVS Caremark settles whistleblower case for $4.25 million

by Ben Vernia | December 2nd, 2013

On December 2, the Department of Justice announced that CVS Caremark, a pharmacy benefits manager company, had settled a case initially brought by a whistleblower for $4.25 million. According to DOJ’s press release:

Caremark LLC, a pharmacy benefit management company (PBM), will pay the government and five states a total of $4.25 million to settle allegations that it knowingly failed to reimburse Medicaid for prescription drug costs paid on behalf of Medicaid beneficiaries, who also were eligible for drug benefits under Caremark-administered private health plans, the Justice Department announced today. Caremark is operated by CVS Caremark Corp., one of the largest PBMs and retail pharmacies in the country. A PBM administers and manages the drug benefits for clients who offer drug benefits under a health insurance plan.

Under the terms of the agreement, the government will receive approximately $2.31 million. In addition, five states — Arkansas, California, Delaware, Louisiana and Massachusetts — will share $1.94 million.

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Caremark served as the PBM for private health plans that insured a number of individuals receiving prescription drug benefits under both a Caremark-administered plan and Medicaid. When an individual is covered by both Medicaid and a private health plan, the individual is called a “dual eligible.” Under the law, the private insurer, rather than the government, must assume the costs of health care for dual eligibles. If Medicaid erroneously pays for the prescription claim of a dual eligible, Medicaid is entitled to seek reimbursement from the private insurer or its PBM, in this case Caremark.

According to the government, Caremark allegedly used a computer claims processing platform called “Quantum Leap” to cancel claims for reimbursement submitted by Medicaid for dual eligibles. The government alleged that Caremark’s actions caused Medicaid to incur prescription drug costs for dual eligibles that should have been paid for by the Caremark-administered private health plans rather than Medicaid.

DOJ announced that the whistleblower, a former Caremark quality assurance representative, will receive $505,680 of the federal share (a nearly 22% share), plus an undetermined amount of some of the state settlement payments.

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