Judge Orders CVS to Pay $290 Million in Medicare Overbilling Case

A federal judge has ordered CVS Caremark, the pharmacy benefit manager owned by CVS Health, to pay nearly $290 million in damages and penalties for overbilling Medicare. In his ruling, Chief Judge Mitchell Goldberg of the Eastern District of Pennsylvania tripled an earlier damages figure, raising the total from $95 million to $285 million under the federal False Claims Act, plus $4.87 million in civil fines. The judge rejected CVS’ arguments that the penalty should be limited, stating that the company’s actions were “financially motivated, not the result of some innocent or mistaken belief.”

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The case centered on inflated drug claims submitted to Medicare Part D between 2010 and 2012. Evidence showed CVS Caremark caused insurers, including Aetna, to report artificially high drug costs to the Centers for Medicare and Medicaid Services (CMS), even as pharmacies like Rite Aid and Walgreens were paid less. Judge Goldberg stressed that the fraud not only cost the government financially but also undermined public trust in the Medicare system, as CMS depends on accurate pricing data from companies like Caremark.

CVS said it intends to appeal, continuing its legal fight after a separate ruling last month ordered its Omnicare unit to pay nearly $949 million for fraudulent billing practices.

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The lawsuit was first filed in 2014 by Sarah Behnke, a former head actuary for Medicare Part D at Aetna. She accused CVS Caremark of manipulating reported drug prices, leading to inflated government reimbursements while underpaying pharmacies. Her case was brought under the False Claims Act, a law that empowers whistleblowers to sue on behalf of the US government and collect a share of the recovered damages, usually between 15% and 30%.

Judge Goldberg, who presided over a non-jury trial earlier this year, concluded that CVS Caremark’s misconduct extended beyond financial harm. He noted that the company’s actions damaged CMS’s trust in private contractors and by extension diminished public confidence in the Medicare program. The case highlights growing scrutiny of pharmacy benefit managers (PBMs), middlemen in the US healthcare system whose pricing practices are under fire from lawmakers and regulators.

For CVS, the ruling adds to mounting legal troubles. Only weeks ago, a separate federal judge in New York ordered Omnicare, another CVS subsidiary, to pay $948.8 million in a different whistleblower lawsuit alleging fraudulent billing. CVS has vowed to appeal both judgments, but the combined penalties totaling over $1.2 billion underscore the scale of its legal exposure and the wider debate over PBMs’ role in drug pricing.