Caremark faces 290 million penalty in Medicare fraud ruling

A federal judge orders CVS Health's Caremark to pay nearly 290 million in damages and penalties for false Medicare Part D cost reporting tied to 2013 and 2014.

Caremark Ordered to Pay 290 Million Penalty After Medicare Fraud Ruling

A federal judge in Philadelphia has ordered CVS Health's pharmacy benefit manager Caremark to pay about 289.9 million in damages and penalties plus 4.87 million in civil penalties after a finding of false cost reporting to Medicare Part D in 2013 and 2014. The verdict triples an earlier 95 million damages finding, with post judgment interest beginning immediately. The decision stems from a whistleblower filing by former Aetna actuary Sarah Behnke, who alleged Caremark manipulated drug cost reports to hide profits. CVS Health said it plans to appeal and noted the ruling covered only certain issues of liability while continuing to contest others. The court found Caremark acted with reckless disregard and deliberate ignorance, rather than actual knowledge, and emphasized that the overall fraud loss was substantial. The case involved multiple Caremark entities and centers on how drug costs were reported to Medicare Part D, ultimately overcharging the program by about 95 million.

This ruling underscores how whistleblowers can drive accountability in complex health care programs. It shows courts are willing to use substantial penalties to deter misreporting in government drug programs, even when the company disputes some findings. The decision also highlights the tension between punitive penalties and due process, as regulators weigh how to calibrate fines to reflect the underlying harms without stifling legitimate business practices. For CVS Health, the case tests its governance posture and could influence future settlements or compliance overhauls. For patients and taxpayers, it signals that the system is watching and prepared to punish misleading reporting that drives up costs.

Highlights

Expect further legal moves as the parties navigate post judgment processes