Berger & Montague, P.C.: False Claims Act Case Against Caremark (CVS Health) Unsealed

PHILADELPHIA, April 4, 2018 /PRNewswire/ -- Berger & Montague, P.C. announces that a False Claims Act case against CVS Health Corporation, (f/k/a CVS/Caremark Corporation, ("Caremark") has just been unsealed by the court. The government has not yet determined whether it will intervene in the action, but instead filed a notice on April 2, 2018 that it is not intervening at this time. The case involves drugs dispensed to beneficiaries under Medicare Part D. Plaintiff alleges that Caremark, as a PBM (Pharmacy Benefits Manager), reported to CMS higher prices than what Caremark was actually paying the pharmacies, despite CMS regulations that require the reporting of "pass-through" prices.

The scheme involves separate sets of contracts with Part D Plans on one side and pharmacies on the other. Pharmacies were paid lower drug prices than the government-insured Part D Plans were charged.  Plaintiff estimates that this deliberate fraud has cost CMS and beneficiaries well over one billion dollars. 

CMS changed its regulations in 2010 to require the reporting of "negotiated prices" and to eliminate any PBM spread in the reported drug costs. In addition to wanting to eliminate PBM spread from drug costs (and pay administrative expenses and profits separately), CMS was pushing to have lower prices for beneficiaries and more transparency overall. Notwithstanding this important regulatory change, Caremark continued the same manner of price reporting that it had used prior to the change. Consequently, not only CMS but also Medicare beneficiaries have unwittingly paid higher prices for their drugs than what Caremark was actually paying the pharmacies. More specifically, Caremark's price reporting caused CMS to overpay Reinsurance and Risk-corridor payments under Part D, and for premiums to be inflated, based on Caremark's fraudulent reporting of the prices "actually paid" to the pharmacies.

The fraud was uncovered by the head actuary, Medicare Part D, at Aetna Inc. ("Aetna"), which contracted with Caremark to serve as its PBM. The complaint alleges that when Aetna realized that Caremark was seemingly not obtaining competitive prices for Aetna's Part D plans, Aetna confronted Caremark about the pricing practices. Caremark confirmed that Aetna wasn't getting competitive prices, leading Aetna to ask if Caremark could go back to renegotiate with the pharmacies. In those discussions, the complaint alleges, Caremark admitted that it had better prices with pharmacies, but it didn't have to pass those prices through to Aetna's Part D Plan. Critically, from the government's perspective, those "better prices with pharmacies" were NOT being reported to CMS, despite the pass-through price reporting requirements and the definitions of  "actually paid" prices.

"We believe this is a massive fraud, carefully orchestrated to keep hidden a substantial PBM spread on generic drugs in the Part D program," said Susan Schneider Thomas of Berger & Montague, one of the lead lawyers on this case. "Some beneficiaries were charged higher co-pays at point of sale, and CMS overall was grossly overcharged for drugs in its important Part D program. Although many people focus on the fact that generic drugs are much cheaper than brand drugs, and therefore not a lot of attention is paid to generic drug prices, in fact there are many opportunities for cheating on the generic side as well – and participants in Part D take advantage of the fact that the government might not be paying as much attention as on the brand side."

Caremark owns both CVS pharmacies (where many of these drugs are dispensed) and SilverScript Insurance Company ("SilverScript"), a major Part D Plan Sponsor. Also, Caremark (now CVS Health Corp.) and Aetna are presently planning to merge. That transaction is currently being scrutinized by the Antitrust Division of the United States Department of Justice. Further, legislatures, investigators and industry analysts have long lamented the lack of transparency in the PBM market. Indeed many have placed much of the blame for higher drug costs on the PBMs.  Fortune magazine, for example, titled a 2014 article about PBMs "Painful prescription: Pharmacy benefit managers make out better than their customers."  As an industry commentator noted, "these middlemen can accomplish this by claiming inflated costs (or negotiated prices) incurred from reimbursing pharmacies without properly disclosing the various chargebacks and other payments that PBMs receive from pharmacies as a condition of contract terms imposed by the PBM." Medicare's Right to Tackle Part D Slush Fund for PBMs, B. Douglas Hoey, November 4, 2014. The State of Ohio just announced an inquiry into complaints that private pharmacy benefit managers appear to be profiting excessively by slashing reimbursement rates paid to retail pharmacies. Caremark is the PBM for four of Ohio's five managed-care plans. See "State Lawmaker on Prescription Drug Middlemen: We're Getting Hosed," The Columbus Dispatch, March 15, 2018.

"We are excited about the prospect of bringing these costly PBM practices into the public eye, and breaking the conspiracy of silence that the PBMs have long imposed on other participants in the industry," said Thomas.  

For more than a decade, the Berger & Montague Whistleblower, Qui Tam & False Claims Act Practice Group has represented whistleblowers in matters involving healthcare fraud, defense contracting fraud, IRS fraud, securities fraud, and commodities fraud, helping to return more than $3 billion to federal and state governments. In return, whistleblower clients retaining Berger & Montague to represent them in state and federal courts have received more than $500 million in rewards.

Please Contact

Susan Schneider Thomas
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Berger & Montague, P.C.
215-875-5711
[email protected]

SOURCE Berger & Montague, P.C.

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