CVS’ Caremark Settles Whistleblower Lawsuit for $4.25 Million

January 3, 2014 — What action can health care employees take to prevent Medicaid from being deluged with false claims by pharmacy benefit management companies? To tackle the problem, the U.S. Justice Department relies on information from health care insiders. The federal False Claims Act includes qui tam provisions that enable insiders to file suit for the benefit of the government. To incentivize tipsters to come forward, the Act entitles whistleblowers to a handsome portion of the recovery.

False Claims Act Suit Alleged Wrongful Denial of Medicaid Claims for Reimbursement of Prescription Drugs in Dual Eligibles

Caremark LLC, a pharmacy benefit management company (PBM), has settled a whistleblower lawsuit with the federal government and with five states for a total of $4.25 million. In a False Claims Act lawsuit, a tipster had alleged that Caremark knowingly withheld reimbursement to Medicaid for the cost of prescription drugs for Medicaid beneficiaries who also were covered under Caremark-administered private health plans. The federal government will receive $2.31 million under the settlement and $1.94 million will be shared among five states — California, Massachusetts, Louisiana, Delaware and Arkansas.

Caremark is operated by CVS Caremark Corp., a large national retail pharmacy and PBM. A PBM administers pharmaceutical benefits for clients who provide drug benefits under a health insurance plan. When someone is covered by a private health plan and by Medicaid, the person is known as a “dual eligible.” A private insurer, not the government, assumes the costs of prescription drugs for dual eligibles. Should Medicaid erroneously pay for drugs for a dual eligible, the healthcare program may seek reimbursement either from the private insurer or its PBM, which in this case was Caremark.

According to the Justice Department, Caremark allegedly used a computer program to cancel Medicaid’s claims for reimbursement for dual eligibles. This allegedly resulted in Medicare paying for prescription pharmaceutical costs that should have been borne by private health plans.

The allegations against Caremark were initially brought to light in a False Claims Act suit filed by Janaki Ramadoss, formerly a quality assurance representative with Caremark. Ramadoss will be awarded around $505,680 from the federal government’s portion of the settlement. In addition, Ramadoss will receive additional compensation from the awards to the settling states.

Blowing the Whistle on Prescription Drug Fraud

Most health care employees want no part of a Medicaid fraud operation. These hardworking insiders would do well to discuss their rights under the False Claims Act before filing a qui tam lawsuit. With experienced whistleblower lawyers in California, Texas and the Washington, D.C. area, Waters & Kraus understands how to advance and safeguard your interests. When you’ve decided to notify the government about Medicaid fraud, contact us by email or phone our False Claims Act lawyers at 855.784.0268 to learn more about our qui tam practice.

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