PBM Turns Down the Heat by Settling Medicaid Fraud Allegations

Caremark, LLC, operated by CVS Caremark Corporation, has settled a qui tam lawsuit, agreeing to pay the federal government $6 million for the cost of prescription drugs that Caremark should have reimbursed Medicaid. The whistleblower in this suit, Donald Well, a former Caremark employee, will receive $1.02 million plus interest for his involvement in the suit, according to a Department of Justice press release.

Medicaid, like Medicare, is the secondary payer for any individual that has private health insurance.In this case, a computer program operated by Caremark allegedly failed to pay the full amount due on certain claims because it improperly calculated certain co-payments and deductible amounts. These amounts were then paid by Medicaid when they should have been paid by Caremark.

Alleged Fraud

Caremark served as the pharmacy benefit manager (PBM) for a private health plan for individuals who were eligible to receive prescription medications that were paid from a Caremark-administered health plan and Medicaid. A PBM is contracted by an insurance company to administer and manage drug benefits. Medicaid is entitled to seek reimbursement from a PBM or insurer if it pays for a service that should have been paid by either the PBM or the insurer. In this case, the government alleged that Caremark’s computer program caused Medicaid to incur prescription drug costs that is should not have incurred.

“We are committed to protecting the integrity of state Medicaid programs,” said Joyce R. Brands, Acting Assistant General for the Justice Department’s Civil Division in the press release announcing the settlement. “It is vitally important that cash-strapped Medicaid programs receive reimbursement for the costs they incur that should be properly paid by other insurers,” continued Brands.


This case was handled by the U.S. Attorney’s Office of the Western District of Texas, the Justice Department’s Civil Division and HHS’ Office of the Inspector General under the Health Care Fraud Prevention and Enforcement Action Team (HEAT) which is a partnership between the Departments of Justice and Health and Human Services to reduce fraud abuse. Since January 2009 when the HEAT initiative began, a total of $14.2 billion has been recovered from cases involving fraud against federal health care programs and nearly 1,400 individuals have been charged with defrauding a federal health care program.