CVS Caremark Pays $4.25 Million to Settle False Claims Allegations

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Earlier this month, Caremark Incorporated – a drug benefit management company operated by drug retail giant CVS Caremark Corporation –agreed to pay $4.25 million to settle allegations that it knowingly failed to reimburse Medicaid, Tricare, and other governmental health care programs, for prescription drug costs paid on behalf of beneficiaries who were also covered by private insurance companies administered by Caremark. The federal government will receive approximately $2.31 million and five states – Arkansas, California, Delaware, Louisiana and Massachusetts – will share $1.94 million under the settlement agreement.

The settlement, one of the largest settlements in the history of the False Claims Act, will resolve a case brought by Janaki Ramadoss, a former Caremark quality assurance representative in Texas. Ms. Ramadoss filed the action, titled United States ex rel. Ramadoss v. Caremark Inc., No. SA99CA0914 (W.D. Tex.), in 1999, alleging “reverse false claims” by defendants Caremark and several affiliates “to avoid, conceal, or decrease Defendants’ . . . obligation to pay or transmit money to the Government . . . .” Ms. Ramadoss alleged that although the law requires private insurers to assume the costs of health care for “dual eligibles” – individuals covered by Medicaid and private insurance plans – defendants did not reimburse the government for payments made on behalf of dual eligibles.

According to her complaint, Ms. Ramadoss “perform[ed] daily audits of claims for data entry error, perform[ed] quality checks on claims and identif[ied] system problems that impede the correct processing of claims for payment.” She alleged that defendants’ computer system was purposely designed to use a “dummy code” to reject reimbursement claims submitted by Medicaid and other governmental programs on behalf of dual eligibles. Ms. Ramadoss further alleged that she was called a “troublemaker” by her supervisors after she repeatedly brought her concerns to their attention, to no avail. She will receive more than $500,000 from the federal government’s share of the settlement and additional amounts from the settling states.  

To read the U.S. Department of Justice’s recent press release regarding this case and its settlement, click here.