CVS Health’s Caremark Ordered to Pay $290 Million Over Medicare Overcharges

A federal court has directed Caremark, the pharmacy benefits manager for CVS Health, to pay nearly $290 million due to allegations of overcharging Medicare for prescription drugs a decade ago.

This came after Sarah Behnke, a former actuary at Aetna, accused Caremark of defrauding Medicare Part D through inaccurate drug cost reporting in 2013 and 2014.

In June, a ruling found Caremark responsible, with Judge Mitchell Goldberg of Philadelphia Federal Court postponing the final penalty but initially imposing $95 million in damages.

This week, the judge, appointed by George W. Bush, increased the penalties to about $289.9 million, including $4.87 million in civil penalties. Caremark, along with its subsidiaries, was found liable for this total amount, according to court documents.

The legal team expressed mixed feelings, noting, “We appreciate some favorable points from Behnke’s case against CVS Pharmacy but are disappointed with the findings against Caremark on other counts. An appeal is in the works.”

The 2014 accusations mentioned that Caremark had been allegedly pressuring Aetna and Silverscript to provide misleading compensation reports during the same time frame.

Despite the scheme allegedly hiding profits and leading to more than $95 million being paid out fraudulently, Judge Goldberg did not find evidence of “actual knowledge” of fraud. However, the court documentation indicates he did recognize instances of willful blindness.

Caremark contended that the 513 false reports shouldn’t result in penalties exceeding the original $95 million, citing concerns over the Eighth Amendment regarding excessive fines.

Goldberg, however, cited a precedent from a 2003 insurance case that upheld such penalties, indicating that the process followed in this case was lawful since the penalty ratio was lower than in past judgments.

Furthermore, accrued interest on the final judgment, beginning Tuesday, will continue until Caremark makes the full payment, thus ensuring that any delays on their part would be financially detrimental.

However, there remains uncertainty over how much Behnke herself will ultimately receive from this judicial outcome.

No immediate comments were provided by Aetna, Sarah Behnke, or attorney David Metcalf when approached for feedback.