CVS to Pay $17.5M to Settle Medicaid Billing Case

CVS Pharmacy Inc. has agreed to pay the federal government and 10 states $17.5 million to settle False Claims Act claims that it overbilled Medicaid for prescription drugs, the Department of Justice said Friday.  

CVS allegedly submitted inflated prescription claims to the federal government by billing Medicaid in Alabama, California, Florida, Indiana, Massachusetts, Michigan, Minnesota, New Hampshire, Nevada and Rhode Island for more than what CVS was owed for prescription drugs for so-called "dual eligible" Medicaid beneficiaries who were also eligible for benefits under a third-party insurance plan.

Rather than billing the government for what the insured would have been obligated to pay had the claims been submitted to a third-party insurer, CVS billed and was paid a higher amount by Medicaid, DOJ said in a media release.

CVS Pharmacy Inc., the retail division of Woonsocket, RI-based CVS Caremark Corp. operates more than 7,000 retail pharmacies in 41 states and the District of Columbia. The retailer issued a statement acknowledging the settlement, but "expressly" denied "engaging in any wrongful conduct and has settled the matter to avoid the expense and uncertainty of protracted litigation."

CVS said it did not intentionally overcharge any state Medicaid program. "The Company regularly receives reimbursement from Medicaid and believes it is in compliance with each state's billing requirements for dual-eligible patients. Dual-eligible patients with third-party insurance coverage comprise a small percentage of the Medicaid patient population and this matter involves only certain state Medicaid programs. The settlement involves the CVS/pharmacy retail business only and does not involve CVS Caremark's PBM or Medicare Part D businesses," the media release said.

Under the settlement, the retailer agreed to  pay the United States $7.9 million and the states $9.5 million plus interest. CVS has also amended a corporate integrity agreement with the Department of Human Services, Office of Inspector General, which has been in effect since March 14, 2008, in connection with an earlier, separate settlement.

The amendment, which will be in effect for three years, will monitor CVS's implementation of correct billing procedures and the training and education of employees. An independent auditor will issue reports on CVS's compliance.

The allegations were brought to the government by Stephani LeFlore, a CVS pharmacist in St. Paul, MN, in a whistleblower lawsuit. LeFlore will receive a total of $2.5 million as her share of the settlement.

The Justice Department said it has used the False Claims Act to recover more than $5.5 billion since January 2009 in cases involving fraud against federal healthcare programs.