A federal court has just delivered a stinging verdict: CVS Caremark must now shoulder nearly $290 million in damages and penalties after being found complicit in a Medicare Part D overbilling scheme. But this staggering penalty is just the surface; read on to discover how it all started and why the stakes remain high.
Federal judge triples damages against CVS
CVS Health’s pharmacy benefit manager, Caremark, has been ordered to pay $289.9 million after a whistleblower accused the company of overcharging Medicare for prescription drugs more than a decade ago. The case was initiated by Sarah Behnke, a former actuary at Aetna, who claimed Caremark defrauded the Medicare Part D program by submitting false drug cost reports in 2013 and 2014.
In June, Caremark was found liable, and Philadelphia’s Chief Judge Mitchell Goldberg initially ordered the company to pay $95 million in damages while postponing a decision on additional penalties.
On Tuesday, Goldberg—appointed to the bench by President George W. Bush—tripled the damages and concluded that Caremark Rx, CaremarkPCS Health, and CVS Caremark Part D Services are jointly responsible for a total of $289.9 million in damages and penalties, according to court filings. The judge also tacked on an additional $4.87 million in civil penalties.
Goldberg also ordered post-judgment interest, meaning the $289.9 million will begin accruing interest as of Tuesday and will continue to grow until Caremark makes full payment. This interest is intended to compensate both whistleblower Sarah Behnke and the federal government, ensuring CVS cannot stall its obligation without financial consequences. However, it remains uncertain exactly what portion of the total award Behnke herself will ultimately receive.
CVS vows to appeal after mixed court ruling
CVS addressed the recent judgment in a statement to FOX Business, saying: “We are pleased that the Behnke ruling in June was in our favor as to certain issues for CVS Pharmacy and CVS Health Corporation’s liability, and disappointed the court found against Caremark on other issues. We plan to appeal.”
In simpler terms, the company expressed mixed feelings about the outcome. CVS emphasized that part of the earlier ruling in June worked in its favor, particularly concerning the liability of CVS Pharmacy and its parent company, CVS Health Corporation. However, the court’s decision against its Caremark division did not go as they had hoped. Due to this split result, CVS has made it clear that it intends to appeal the case, aiming to challenge the unfavorable aspects of the judgment.
The appeal could take months, or even years, to resolve, but in the meantime, interest on the nearly $290 million continues to build until payment is made.
How it all started
Court documents reveal that back in 2014, CVS Caremark faced accusations of manipulating the way prescription drug costs were reported. This practice allegedly pushed Aetna and SilverScript to file misleading direct and indirect remuneration (DIR) reports for the years 2013 and 2014. The scheme, which prosecutors said was intended to mask profits, ultimately caused Medicare Part D to be overbilled by roughly $95 million.
Goldberg ruled that while there was no evidence of actual knowledge of the fraud, Caremark’s actions showed reckless disregard and deliberate ignorance, which justified the steep financial penalties. In its defense, Caremark argued that the 513 false reports tied to the case should not result in fines that went beyond the $95 million overcharge, pointing to protections under the Eighth Amendment’s ban on excessive fines and the due process clause.
Goldberg disagreed, emphasizing that a $95 million loss to Medicare was “certainly significant.” Referencing a 2003 State Farm insurance case, the judge further concluded that Caremark’s constitutional claims did not hold because the penalty-to-damages ratio in this case was far lower than what courts had previously upheld.
What this means for CVS patients
For now, CVS patients shouldn’t expect any immediate changes to their prescriptions or Medicare Part D coverage—the ruling affects the company financially, not access to medications. However, large fines like this could put long-term financial pressure on CVS, potentially influencing future pricing, fees, or how services are structured. Beyond the numbers, the case also raises questions about trust and oversight, as patients may now scrutinize the company’s billing practices more closely.
With CVS planning to appeal, the $290 million judgment isn’t final yet, meaning any indirect impact on patients will be delayed. While the immediate effect is minimal, the ruling could shape how CVS operates and maintains compliance with Medicare rules in the years ahead.
Source: FOX Business