CVS Hit with Nearly $950 Million Judgment in False Claims Case Over Omnicare Drug Billing

Key Takeaways

• $948.8 Million Judgment: A federal judge ordered CVS to pay $948.8 million over false claims submitted by its Omnicare unit for improperly dispensing drugs without valid prescriptions.
• Whistleblower Case Under FCA: The case was brought by a former Omnicare pharmacist and joined by the DOJ in 2019. The False Claims Act mandates treble damages, inflating the award.
• Scope of the Fraud: Omnicare submitted over 3.3 million false claims between 2010 and 2018, billing Medicare, Medicaid, and Tricare for drugs lacking valid prescriptions.
• Judge Rejects CVS’s Defense: Judge McMahon dismissed CVS’s argument that the penalty was excessive, noting that strict FCA penalties could have pushed damages to over $26.9 billion.
• CVS Plans to Appeal: CVS maintains that the case involves a technical record-keeping issue that was common industry practice and says no patients were harmed.

Deep Dive

A federal judge has ordered CVS Health to pay nearly $950 million in penalties and damages after its Omnicare unit was found to have illegally billed government healthcare programs for prescription drugs that weren’t properly authorized. The massive award stems from a whistleblower case that uncovered years of fraudulent dispensing practices tied to more than 3.3 million false claims.

U.S. District Judge Colleen McMahon on Monday imposed a $542 million civil penalty and awarded $406.8 million in damages, tripling the $135.6 million initially awarded by a jury earlier this year, a requirement under the federal False Claims Act (FCA).

“Admittedly [the fine] is a very big number,” McMahon acknowledged in her order. “But this was a very big fraud on the Government, one that lasted over almost a decade, and one that Omnicare was aware of but avoided taking steps to correct.”

The case was first brought in 2015 by a former Omnicare pharmacist, who alleged the company improperly billed Medicare, Medicaid, and the military’s Tricare program for drugs dispensed without valid prescriptions between 2010 and 2018. CVS, which acquired Omnicare in 2015, denied any wrongdoing and said it will appeal the decision.

The Department of Justice joined the case in 2019, and a jury found in favor of the government this past spring. The False Claims Act, a key tool for rooting out healthcare fraud, allows whistleblowers to sue on behalf of the government and recover a portion of any damages awarded.

According to court filings, Omnicare routinely dispensed medications to elderly and disabled patients in long-term care and assisted living facilities even when prescriptions had expired or were otherwise invalid. These practices led to over $135 million in improper charges to federal healthcare programs, the government alleged.

In her ruling, Judge McMahon pushed back against CVS’s argument that the nearly $949 million judgment violates the Constitution’s prohibition on excessive fines. She noted that under a strict reading of the FCA’s statutory minimum penalty ($5,000 per false claim) CVS could have faced a staggering $26.9 billion in penalties on top of damages.

CVS has insisted the case revolves around what it describes as “a highly technical prescription dispensing record keeping issue” that was common across the industry and accepted by regulators at the time.

“There was no claim in this case that any patient paid for a medication they shouldn’t have or that any patient was harmed,” a CVS spokesperson said in a statement, calling the penalty “unconstitutional.”

Still, the ruling marks a significant setback for the healthcare giant as it wrestles with rising medical costs in its Aetna business and continued headwinds in its core retail pharmacy segment. Despite the size of the judgment, it represents a modest hit for CVS, which reported $372.8 billion in revenue last year.

As the company prepares its appeal, the case stands as one of the most significant FCA judgments in recent memory.

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