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.

Will CVS Lead the ‘Pack’ in Tobacco Product Removal?

By Lisa A. Weder

One of the largest U.S. pharmacy chains has made a bold move. Over 7,600 CVS pharmacy (CVS) stores have removed all tobacco products from their shelves. The move will result in an estimated revenue loss of $2 billion from tobacco consumers, which includes actual tobacco sales and incidentals purchased while in the store. Not only that, the pharmaceutical retailer has officially changed its corporate name to CVS Health to reflect its commitment to healthy lifestyles. The pharmacies will continue to be known as CVS pharmacy.

CVS’ tobacco removal deadline had been October 1, 2014, but the company exceeded it, ending tobacco sales on September 3, 2014, the same day it announced its new name change.

Why now? In recent years, CVS stores around the country have been found noncompliant with the Federal Food, Drug, and Cosmetic Act (FDC Act), as amended by the 2009 Family Smoking Prevention and Tobacco Control Act (Tobacco Control Act) and the Regulations Restricting the Sale and Distribution of Cigarettes and Smokeless Tobacco to Protect Children and Adolescents (21 C.F.R. Part 1140). The Tobacco Control Act “[r]ecognizes that virtually all new users of tobacco products are under 18–the minimum legal age to purchase these products,” according to an FDA fact sheet. The law gives the FDA restrictive authority over the manufacture, distribution, and advertising of tobacco products in an attempt to curtail false and misleading advertising and labeling often aimed at teens.

However, CVS President and CEO, Larry Merlo, attests to the company’s change in heart as one that is consistent with the company’s focus on health. In addition to removing tobacco products, CVS Health has launched a widespread smoking cessation campaign to help millions of Americans to quit smoking that falls in line with the FDA’s “The Real Cost” campaign.

“The Real Cost” campaign. Aside from regulatory authority, the FDA has expanded its smoking cessation efforts by launching The Real Cost, a national marketing campaign targeted at kids between the ages of 12 and 17 on February 11, 2014. The year-long campaign will air across multiple media platforms including TV, radio, print, and online in over 200 markets. In an FDA video announcing the campaign’s launch, FDA Commissioner Margaret A. Hamburg, M.D., said, “This campaign is about trying to reach those kids who are on the cusp of smoking, those that have already been experimenting a little bit with cigarettes, or maybe who are just one party away from starting to smoke. We want to reach them, we want them to understand the real costs of picking up that cigarette and smoking it, and we hope that we can make a difference–we hope that ultimately we will save lives.” The campaign hits youths where it counts—their appearance and the consequence that smoking has on it, such as premature wrinkling and tooth loss.

Dr. Richard Wender, chief cancer control officer at the American Cancer Society, noted that CVS’ extraction from the norm ” … is an important, bold public health decision by a major retail pharmacy to act on the long understood reality that blending providing health care and providing cigarettes just doesn’t match.”

Can CVS afford to lose 2 billion? Apparently, it can. The company took in nearly $94 billion in revenues in the first three quarters of 2013, which was an increase compared to the same time frame in 2012. Pharmacy services and prescription drug sales contributed to the revenue hike. Other pharmacies, such as Walgreens, are keeping a close watch on the situation, and only time will tell whether CVS will continue to lead the pack or sink back to business as usual.

Government Delays Fuel Industry Procrastination for ICD-10 Compliance

The delay in the compliance deadline for the implementation of the 10th revision of the International Classification of Diseases coding system (collectively referred to as ICD-10) has negatively affected testing and transition timelines for health care organizations, according to a Workgroup for Electronic Data Exchange (WEDI) survey. According to an iHealthBeat report, when CMS announced a final rule establishing October 1, 2015, as the compliance date for ICD-10, as an extension over the prior compliance date of October 1, 2014, some providers delayed their preparation efforts (see, One year ICD-10 delay is now official, August 4, 2014).


WEDI has conducted nine surveys, beginning in 2009, to track industry preparedness for the coding transition. The most recent survey evaluated 514 respondents that included: 324 providers, 103 health plans, and 87 vendors.


The survey found that efforts have been made across the industry since October 2013 to begin preparing for the transition. However, the survey also discovered that many stakeholders have not prepared basic impact assessments, external testing, or the release of ICD-10 compliant documentation and billing products because they have pushed those steps back into 2015. Specifically, the survey found that 50 percent of respondents had completed impact assessments, 40 percent indicated that they were unsure when they would complete them, 35 percent of providers had begun external testing, and 50 percent of providers indicated that they did not anticipate starting external testing until 2015. The survey also demonstrated that smaller providers were less likely to have completed external testing than their larger counterparts.

Warning to HHS

WEDI Chair and ICD-10 Workgroup Co-Chair, Jim Daley, authored a letter to HHS Secretary Sylvia Burwell expressing the significance of the study’s findings. The letter cautioned that, although the pushed back compliance date gave providers the opportunity to undergo adequate testing and preparation, some providers, particularly smaller ones, “are not taking full advantage” of the extra time. The letter warned HHS that without dedicated efforts taken by procrastinating organizations to move forward with ICD-10 compliance, there is a risk that the industry will see “significant disruption” when ICD-10 compliance becomes mandatory on October 1, 2015.

Part D Plan Switch May Leave High Costs and Donut Hole Behind

Only five percent of Medicare beneficiaries are enrolled in the Medicare prescription drug plan (PDP) that provides him or her with the lowest total out-of-pocket costs, according to a recent study by eHealth®. The study, which pulled data from 22,000 users of the eHealthMedicare.com and PlanPrescriber.com online Medicare plan comparison tools, found that while 42 percent of Medicare beneficiaries were projected to hit the Medicare prescription drug coverage cap, also known as the donut hole, in 2014, that number could be dropped as low 19 percent if those same users switched to the lowest out-of-pocket cost plan available to them. An eHealth report summarizing the study’s findings suggests that, in light of the findings of the study, Medicare beneficiaries should reevaluate their PDP choice when Medicare’s annual election period opens between October 15, and December 7, 2014.


The user data was used to make over 17,000 stand-alone PDPs comparisons and over 5,000 comparisons of Medicare Advantage Prescription Drug plans (MA PDPs). The study’s comparisons evaluated existing user plans with other available plans in a beneficiary’s area. The comparison was made by cross referencing information like a user’s known prescription drug costs, monthly premiums, co-pays, co-insurance, and deductibles. For the purposes of comparing prices, the study assumed that prescription drug needs did not change for the beneficiaries in question.


Regarding MA PDPs, only 11 percent of users were enrolled in the lowest cost plan in terms of out-of-pocket cost. The study also determined that, on average, switching to the lowest cost plan would have saved Medicare beneficiaries with MA PDPs $218 annually. Stand-alone PDP beneficiaries fared even worse with only 3 percent enrolled in the lowest cost plan. Additionally, stand-alone PDP beneficiaries would have realized a projected annual savings of $961 if they had switched to the lowest out-of-pocket cost plan.

Reasons for Change

The summary of the study evaluated some of the reasons that PDPs change in order to explain why a beneficiary may want to reevaluate a prior plan selection. The study suggests that formularies, premiums, deductibles, coinsurance amounts, co-payments, and drug tiers that assign costs to certain drugs all can change dramatically from year to year. As a result, eHealth suggests that the lowest cost plan for a beneficiary one year may not be the lowest cost plan the following year.

Popular Drugs

The study also looked at search data from the 22,000 users and determined that the most common drugs Medicare beneficiaries search for are generic versions of popular brand name drugs. Some of the most popular generics sought by beneficiaries were those used to treat gastroesophageal reflux disease, high blood pressure, high cholesterol, coronary artery disease, type II diabetes, and hypertension.