July 11, 2025
Pharmacy benefit manager (PBM) Caremark (a part of CVS Health) has been found liable under the False Claims Act for causing health insurers to report fraudulent prices to the Medicare Part D prescription drug program. The finding came after an 8-day bench trial in June 2025, in a declined qui tam case in U.S. District Court in Philadelphia. The Court’s opinion is a 105-page tour de force exploring the complexities of Medicare Part D, the players, how the reporting fraud unfolded, how the Relator’s evidence satisfied each element of the FCA, and calculation of damages.
The Court ruled in favor of Relator, finding that PBM Caremark had caused health insurer Aetna and others to overcharge the government for Medicare Part D covered drugs by $95 million in single damages. The $95 million in single damages is now subject to mandatory trebling or $285 million. The court has not yet determined how many false claims were submitted, but with mandatory civil penalties under the FCA equaling $5500 per false claim in the years at issue, the final judgment will likely total over $350 million. Here are briefs filed by the Relator and Defendants on statutory penalties.
Given that Medicare Part D costs Medicare beneficiaries and the government over $130 billion per year, successful FCA enforcement in this area is a welcome development.
Medicare Part D is designed to partially cover the cost of providing prescription drug coverage to Medicare beneficiaries. The Centers for Medicare and Medicaid Services (CMS), administers the program, but it does not purchase drugs or generally negotiate prescription drug prices for beneficiaries. Rather, CMS contracts with health insurers such as Aetna to act as “Part D sponsors.”
The Part D sponsors in turn sell insurance plans to beneficiaries; those plans partially cover the cost of prescription drugs for beneficiaries. Part D sponsors contract with PBMs who negotiate the prices that a Part D sponsor’s customers will pay the retail pharmacy for their prescription drugs. CMS pays the Part D sponsors subsidies by based on price reporting the Part D sponsors make to CMS pursuant to CMS’ regulations.
The Relator was an actuary for Aetna Insurance, a Medicare Part D Plan Sponsor which used Caremark as its PBM. Caremark was largely responsible for the prices reported to CMS by Aetna and others for generic drugs filled at Rite Aid and Walgreens.
Relator filed her FCA qui tam case (U.S. ex rel. Behnke v. CVS Caremark) in 2014. She alleged that the Caremark Defendants caused the Part D sponsors to submit false statements and claims to CMS for Medicare Part D drugs.
The case was declined by the United States in 2018, but the Relator pursued the case. She was represented by Berger Montague, P.C. and Miller Shah LLP. Prior to trial, the Court granted partial summary judgment in Relator’s favor on certain issues and denied Caremark’s motion for summary judgment. The case then proceeded to trial.
At trial, one of Caremark’s primary defenses was that its alleged fraudulent price reporting was not “material” to CMS’s subsidy payments to the health insurers/Part D sponsors. Thus, in Universal Health Servs., Inc. v. United States ex rel. Escobar, 579 U.S. 176 (2016), Caremark could not have violated the FCA. Basically, Caremark argued that CMS was aware of the pricing, but had not done anything about it and continued to pay claims, so Caremark’s alleged misconduct could not have been “material” to CMS’s decision to pay. (Opinion at 51-63).
The United States had declined to intervene in the case, but it filed Statements of Interest countering Caremark’s “materiality” argument. In its SOI on “Materiality” filed post-trial, the United States reiterated arguments from summary judgment SOI, making three arguments to counter Caremark’s materiality defense. First, the United States noted that government declination is of no, or at most “minimal”, relevance to materiality. Second, it argued that it is a defendant’s burden to prove a lack of materiality based on Government knowledge. Third, the United States argued that any perceived Government “failure” to “claw back” from Caremark payments associated with falsely submitted claims should not bear on a materiality finding.
The Court sided with the Relator and the United States and ruled that Caremark’ materiality defense failed. (Opinion at pp. 53-61).
The Court dismissed Relator’s claims against Caremark’s parent corporation, CVS Health Corp. The Court’s decision was based on the fact that CVS Health was not a party to Caremark’s PBM contracts with health insurers/Part D sponsors Aetna or SilverScript nor was it a party to Caremark’s contracts with the pharmacies. (Opinion at pp. 37-39).
Whistleblower Law Collaborative LLC devotes its practice entirely to representing clients nationwide in bringing whistleblower actions. Our clients bring actions under the federal and state false claims acts, and other whistleblower programs including those addressing health care fraud. If you are considering becoming a health care fraud whistleblower or are aware of other types of fraud, contact us for a free, confidential consultation.