Another FCA Challenge for CVS: EDPA Finds That Company Overbilled Medicare Part D to the Tune of $95 Million

Following an eight-day bench trial, a federal judge in the Eastern District of Pennsylvania last month held that CVS Caremark Corporation (Caremark) overbilled Medicare for Part D claims to the tune of $95 million in single damages — not including trebling or per-claim penalties.

In a 105-page opinion, Chief Judge Mitchell S. Goldberg explained his findings, which followed his rulings a few months earlier on the parties’ motions for summary judgment. But before we jump into the substance of those findings, below is some background on the relator and the nature of her claims.

The relator was an actuary in Aetna’s Medicare department and initially filed a complaint on February 6, 2014, which was amended twice. The relator asserted that she used publicly available drug pricing information to assess and compare drug prices — and realized that “Aetna did not pay the same prices for Medicare Part D drugs as Caremark’s other clients.” Through follow-up interactions, the relator allegedly grew concerned that Caremark was inflating Part D prices to earn a spread and thereby profit on commercial purchases. The relator reported her concerns of allegedly inflated prices for Part D drugs, and Aetna ultimately conducted a “market check” and hired outside counsel to conduct an internal investigation. Outside counsel concluded — in memos upon which Caremark “relie[d] heavily” in an effort to negate scienter — that Caremark’s “conduct was accepted practice.”

The relator’s second amended complaint alleged that Caremark caused false claims to be submitted to the government, which resulted in overpayments by Medicare of Part D claims. The complaint also alleged that Caremark, therefore, caused Aetna to submit false claims and statements to the Centers for Medicare & Medicaid Services (CMS). The parties filed motions for summary judgment, which were granted in part and denied in part — leaving open for trial the issues of: (1) falsity specific to Caremark’s relationship with CVS Pharmacy (as the court already granted partial summary judgment on the issue of falsity as to Caremark’s dealings with Walgreens and Rite Aid); (2) materiality; (3) causation specific to Aetna’s submissions to CMS; (4) scienter; and (5) damages.

With respect to (1)-(4):

• Falsity: The court found that the relator did not prove falsity by a preponderance of the evidence with respect to CVS Pharmacy’s relationship with Caremark.
• Materiality: The court held that the relator had sufficiently proved materiality, finding that CMS had relied on Caremark’s reports — which were false — to make payment decisions. The court observed that insurance companies, such as Aetna, relied on statements by Caremark when providing pricing information to CMS. Caremark argued against a finding of materiality by asserting that CMS knew about Caremark’s pricing practices — but Judge Goldberg disagreed, finding that, “[b]ecause CMS did not have actual knowledge that Caremark’s pricing terms and subsequent reporting violated the relevant requirements, CMS’s subsequent inaction has little probative value.” Judge Goldberg further found that “Aetna did not know — and thus could not have told CMS — about the specific contractual provisions which underlie Caremark’s fraudulent representations.”
• Causation: The court found that the relator had sufficiently proved causation, holding that “Caremark knew that Aetna would rely on … [the direct and indirect remuneration (DIR)] data [Caremark provided]” when Aetna prepared reports to be submitted to Medicare and, thus, “Aetna’s later submission of such false reports was … a normal consequence of Caremark’s conduct.” The court disagreed with Caremark’s argument that “Aetna’s independent judgment, preparation of DIR reports, and government inaction represent a superseding cause that breaks the causal chain.”
• Scienter: Citing testimony from employees and company documents, the court found that the relator had sufficiently proved that Caremark acted with the requisite scienter. The court placed “little weight” on Aetna’s internal investigation and “absolution of, Caremark’s pricing scheme” in determining whether requisite knowledge was present. And it dismissed Caremark’s argument that knowledge and inaction by CMS defeated scienter, finding that, despite information being provided to CMS, “CMS was left with an incomplete picture”: “CMS thought its questions were answered, when in reality, it was misled.”

Following the ruling, the parties filed briefs regarding treble damages and statutory penalties earlier this month: Relator argued that the court should award $11,000 for “at least 513 claims,” or $5,643,000 in civil penalties, and should treble damages for a total damages number of $285,000,000; Caremark argued that the court should award $5,500 for four false claims, or $22,000, and not treble damages. The court has yet to rule.

This latest loss for CVS (Qui Notes previously reported on the verdict in the FCA trial of Omnicare and CVS Health Corporation and CVS’ objection to the government seeking penalties in that case) was followed by the filing of three lawsuits against the company by Louisiana Attorney General Liz Murrill related to alleged “unfair, deceptive, and unlawful practices that have harmed Louisiana patients, independent pharmacies, and the public at large.” And last month, Connecticut, Indiana, Oklahoma, and Massachusetts filed a lawsuit against CVS, alleging that the company submitted “false and fraudulent” claims to their respective Medicaid programs. CVS has denied liability in connection with the lawsuits.

We at Qui Notes will monitor these cases and keep our readers apprised of any developments.

© Arnold & Porter Kaye Scholer LLP 2025 All Rights Reserved. This Blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.