A landmark federal court decision has ordered Caremark, the pharmacy benefit manager (PBM) subsidiary of CVS Health, to pay nearly $290 million in damages and penalties. This significant judgment stems from a whistleblower lawsuit alleging the company overcharged Medicare Part D for prescription drugs over a decade ago, highlighting heightened scrutiny on PBM practices and their financial interactions with federal healthcare programs.
- Caremark, a CVS Health PBM subsidiary, has been ordered to pay nearly $290 million.
- The judgment results from a whistleblower lawsuit by former Aetna actuary Sarah Behnke.
- Caremark was accused of overcharging Medicare Part D by an estimated $95 million in 2013-2014.
- Philadelphia federal court Chief Judge Mitchell Goldberg tripled the initial damages due to “reckless disregard.”
- CVS Health has publicly stated its intention to appeal the ruling.
- The court also awarded post-judgment interest, adding to the financial burden.
Origins of the Whistleblower Lawsuit
The legal action originated from Sarah Behnke, a former Aetna actuary, who accused Caremark of submitting false drug cost reports to Medicare Part D in 2013 and 2014. These alleged manipulations were designed to conceal profits, resulting in Medicare Part D being overbilled by an estimated $95 million. Following a June ruling that found Caremark liable, Philadelphia federal court Chief Judge Mitchell Goldberg, in a subsequent order, tripled the initial damages.
Court’s Decision and Caremark’s Defense
Judge Goldberg determined that Caremark Rx, CaremarkPCS Health, and CVS Caremark Part D Services collectively owe $289.9 million in damages and penalties, alongside an additional $4.87 million in civil penalties. While the court did not find “actual knowledge” of the fraud, Judge Goldberg cited “reckless disregard and deliberate ignorance” as sufficient grounds for imposing the substantial penalties. CVS Health, through a public statement, indicated its intention to appeal the ruling, noting its satisfaction with certain aspects of the June decision regarding CVS Pharmacy and CVS Health Corporation’s liability, while expressing disappointment with other findings against Caremark.
Caremark had contended that the 513 false reports submitted did not justify penalties exceeding the $95 million overcharged, invoking the Eighth Amendment’s excessive fines clause and the due process clause. However, Judge Goldberg maintained that a $95 million fraud loss was “certainly significant.” Citing precedent from a 2003 State Farm insurance case, he concluded that due process was not violated, given that the ratio of penalties to actual damages was considerably lower than in previous, comparable decisions.
Post-Judgment Interest and Whistleblower Compensation
Further compounding the financial burden, Judge Goldberg also awarded post-judgment interest, which began accruing on the $289.9 million from the date of the order and will continue until Caremark remits full payment. This measure is designed to compensate the government and the whistleblower, Sarah Behnke, and to discourage any delay in payment by the company. The exact portion of the total award Behnke will receive remains undisclosed.
Emily Carter has over eight years of experience covering global business trends. She specializes in technology startups, market innovations, and corporate strategy, turning complex developments into clear, actionable stories for our readers.