A federal judge has ordered CVS Health’s Caremark division to pay approximately $290 million after determining that the company overcharged Medicare for prescription drugs. Philadelphia’s Supreme Court Justice Mitchell Goldberg raised the initial damages from $95 million to about $285 million, adding a civil penalty of $4.87 million under the False Claims Act. Healthcare companies had hoped for a lower amount, arguing that the questionable claims were only from a two-year period. However, the judge concluded that the fraud stemmed from financial motivations rather than mere mistakes.
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This case originated from a whistleblower lawsuit brought by Sarah Behnke, a former part-time Medicare employee at Aetna. She alleged that CVS Caremark inflated drug prices submitted to insurers like Aetna for Medicare while actually paying pharmacies less. The judge pointed out that this kind of misconduct not only harmed government finances but also eroded the public’s trust. He stressed the importance of accurate pricing data from companies like Caremark for Medicare’s reliability.
Additionally, CVS is grappling with other legal troubles. Last month, the Omnicare division faced a nearly $949 million penalty in a different whistleblower lawsuit that involved fraudulent claims, and CVS intends to appeal both decisions. These cases fall under the False Claims Act, allowing whistleblowers to act on behalf of the government and receive a portion of the recovered funds, typically between 15% and 30%.
Is CVS stock a good purchase?
On Wall Street, analysts generally hold a strong buy consensus for CVS stock, backing it with 14 purchases, one hold, and no sales over the last three months. The average price target for CVS is $83.13 per share, suggesting a potential upside of about 17%.
