CVS
PHILADELPHIA - It will be an eye-opening $290 million penalty for CVS Caremark over prices it charged the federal government for prescription drugs.
Judge Mitchell Goldberg had already imposed a $95 million damages figure on Caremark earlier this year in a False Claims Act, which meant he was to triple that figure because of a provision in that law. He did just that on Aug. 19 while adding another $4.9 million in penalties.
"Although Caremark is only liable for two years of overbilling, the evidence at trial made clear that the fraud was financially motivated, not the result of some innocent or mistaken belief," Goldberg wrote.
"(T)ime and again, Caremark was presented with an opportunity to explain its scheme to CMS and other industry participants, and time and again, Caremark concealed the true nature of its pharmacy contracts."
A whistleblower working for Aetna sued Caremark in 2014 under the False Claims Act, which allows private plaintiffs to act in the interest of the federal government in return for a significant percentage of whatever they recover.
In this case, Sarah Behnke alleged Caremark billed CMS for drugs at a higher price than Caremark paid other retail pharmacies. It was alleged Medicare paid $75 million more than it should have in 2012-2013.
Behnke was Aetna's head actuary for Medicare Part D and claimed Caremark violated federal law requiring PBMs to report so-called "pass-through" prices and that the fraudulent claims cost Medicare and patients billions of dollars, dating back to 2007.
At issue are Generic Effective Rate guarantees, which ensure the cost of generic drugs from pharmacies stays below a certain threshold. Caremark had GER guarantees with Walgreens and Rite Aid, plus its own CVS Pharmacy.
The prices, alleged to be lower than what CMS was charged, allegedly violated law requiring Caremark to report them to CMS. Things got complicated as to how much was actually paid from Caremark's GER agreements and in what matter.
Caremark did not adequately inform CMS on how the GER guarantees worked, Goldberg found, finding the employee responsible for doing so left CMS "with an incomplete picture."
Behnke and her lawyers at Berger Montague are in line for a huge payday. The federal government had the option to join her case but did not. Rewards for whistleblowers top out at 25% of the recovery when the government joins, but goes up to 30% when it does not.
