CVS Pharmacy Inc., the retail pharmacy division of CVS Caremark Corporation that operates more than 7,000 retail pharmacies in 41 states and the District of Columbia, has agreed to pay the United States and 10 states $17.5 million to resolve False Claims Act allegations, the Justice Department said.

The settlement, announced last Friday, resolves allegations that CVS submitted inflated prescription claims to the government by billing the Medicaid programs in Alabama, California, Florida, Indiana, Massachusetts, Michigan, Minnesota, New Hampshire, Nevada and Rhode Island for more than what CVS was owed for prescription drugs dispensed to Medicaid beneficiaries who were also eligible for benefits under a primary third party insurance plan (excluding Medicare as the primary payor). The United States alleged that rather than billing the government for what the insured would have been obligated to pay had the claims been submitted solely to the third party insurer (typically the co-pay), CVS billed and was paid a higher amount by Medicaid.

Under the terms of the agreement with the United States and the 10 states, CVS will pay the United States $7,993,615.55 and the states $9,506,384.45 plus interest. CVS has also executed an amendment to a Corporate Integrity Agreement (CIA) with the Department of Human Services, Office of Inspector General (HHS-OIG), that was executed on March 14, 2008, in connection with a separate investigation and settlement. The amendment to the CIA, which will be in effect for three years, will monitor CVS’s implementation of correct billing procedures and the training and education of employees. In addition, an independent review organization will conduct regular audits and issue reports on CVS’s compliance with the terms of the amendment to the CIA.

The allegations were brought to the government by Stephani LeFlore, a CVS pharmacist in St. Paul, Minn., in a whistleblower action filed under the qui tam, or whistleblower, provisions of the False Claims Act and state False Claims Act statutes. Ms. LeFlore will receive a total of $2,595,460: $1,278,978 of the United States’ recovery and $1,316,482 of the state proceeds from California, Florida, Indiana, Massachusetts, Michigan, New Hampshire, Nevada and Rhode Island. Alabama and Minnesota do not have state False Claims Act statutes.

“This case is an example of the government’s strong commitment to pursue companies that overcharge our federal health programs by submitting false claims,” said Tony West, Assistant Attorney General for the Justice Department’s Civil Division.

“We will not tolerate pharmacies that take advantage of taxpayer funds by billing Medicaid more for drugs than they should have received,” said John William Vaudreuil, U.S. Attorney for the Western District of Wisconsin.

This case was investigated jointly by the U.S. Attorney’s Office for the Western District of Wisconsin, the Commercial Litigation Branch of the Justice Department’s Civil Division, the National Association of Medicaid Fraud Control Units and the HHS-OIG.

“Medicaid covers the poorest, most vulnerable people in American society. Overcharging this needed government program for prescriptions is a disservice to everyone, and won’t be tolerated,” said Daniel R. Levinson, Inspector General of the U.S. Department of Health & Human Services. “OIG will work vigilantly with law enforcement partners at all levels of government to safeguard this vital program.”

This resolution is part of the government's emphasis on combating health care fraud and another step for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced by Attorney General Eric Holder and Kathleen Sebelius, Secretary of the Department of Health and Human Services in May 2009. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in that effort is the False Claims Act, which the Justice Department has used to recover more than $5.5 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department's total recoveries in False Claims Act cases since January 2009 are more than $7.1 billion.

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