CVS Ordered to Pay $290 Million for Medicare Fraud

Key Takeaways

• Massive Penalty: CVS Caremark ordered to pay $289.9 million in damages and penalties for Medicare Part D overbilling.
• Whistleblower Case: Former Aetna actuary Sarah Behnke exposed the scheme involving false drug cost reports in 2013–2014.
• Court’s Ruling: Judge Mitchell Goldberg tripled damages, citing Caremark’s reckless disregard and deliberate ignorance.
• CVS Appeal: The company plans to challenge the ruling, but interest will continue to accrue on the judgment.

Deep Dive

A federal court has handed down a major financial blow to CVS Caremark, ordering the pharmacy benefit manager to pay nearly $290 million in damages and penalties for defrauding the Medicare Part D program. The ruling caps a whistleblower case that began more than a decade ago and underscores the steep consequences companies face for overbilling federal health programs.

The judgment, issued by Philadelphia’s Chief Judge Mitchell Goldberg, found CVS Caremark and affiliated entities liable for submitting false drug cost reports in 2013 and 2014. The case originated from whistleblower Sarah Behnke, a former actuary at Aetna, who alleged Caremark deliberately manipulated prescription drug cost data to overcharge Medicare.

Earlier this year, Judge Goldberg awarded $95 million in damages but delayed a ruling on additional penalties. On Tuesday, he tripled those damages and imposed further civil penalties, bringing the total to $289.9 million plus $4.87 million in fines. He also ordered post-judgment interest, meaning the amount owed will continue to grow until Caremark pays in full.

Goldberg concluded that while CVS Caremark may not have knowingly orchestrated the fraud, the company acted with reckless disregard and deliberate ignorance—grounds that justified a steep financial penalty. He dismissed Caremark’s constitutional arguments that the fines violated the Eighth Amendment’s excessive fines clause, citing precedent that allowed higher penalty-to-damages ratios in similar cases.

CVS Pushes Back with Planned Appeal

In a statement to FOX Business, CVS acknowledged the mixed outcome of the case. The company noted that June’s ruling cleared CVS Pharmacy and CVS Health Corporation of liability but expressed disappointment over the judgment against Caremark. CVS has vowed to appeal, signaling a prolonged legal battle that could take years to resolve.

In the meantime, the nearly $290 million penalty is accruing interest daily, further raising the stakes.

The allegations centered on 513 false reports connected to Aetna and SilverScript, both of which relied on Caremark’s drug cost reporting. Prosecutors argued that these manipulated reports caused Medicare Part D to be overbilled by $95 million. Behnke’s complaint alleged that Caremark intentionally masked profits to reduce its financial obligations, shifting costs onto the Medicare system.

Under the False Claims Act, whistleblowers are entitled to a share of the recovery, though the exact portion Behnke will receive has not yet been determined.

Implications for Patients and Oversight

For patients, the ruling does not immediately impact prescription access or Medicare Part D coverage. However, the financial consequences could put pressure on CVS over the long term, potentially influencing pricing strategies, service structures, or contractual obligations.

The case also raises broader questions about oversight in pharmacy benefit management. With billions of taxpayer dollars at stake, the ruling serves as a warning that regulators and the courts will hold companies accountable for even indirect manipulation of Medicare data. For compliance officers and risk leaders, it highlights the importance of rigorous internal controls, transparency in reporting, and proactive auditing to prevent similar exposure.

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