Dive Brief:
A federal judge has ordered CVS to pay $948.8 million in penalties and damages in a whistleblower case alleging that the company’s Omnicare division illegally charged the U.S. government for prescription drugs.
Manhattan Judge Colleen McMahon imposed a $542 million penalty for what she called “very big fraud” in her Monday order, and awarded $406.8 million in damages — three times the $135.6 million that a jury awarded in the spring, as required under the False Claims Act.
Omnicare filed more than 3.3 million false claims between 2010 and 2018, according to court documents. CVS, which acquired the pharmacy benefits manager in 2015, denied the allegations and said it planned to appeal McMahon’s decision.
Dive Insight:
A former Omnicare pharmacist filed the lawsuit in 2015 accusing the PBM of improperly billing Medicare, Medicaid and the military’s Tricare program for over $135 million in drugs that weren’t actually covered by the programs.
Omnicare — the largest long-term care pharmacy services provider in the U.S. — fraudulently dispensed drugs to elderly and disabled people in long-term care and assisted living facilities without valid prescriptions, according to the complaint.
The Department of Justice joined the suit in 2019, and a jury ruled in favor of the government last spring.
The False Claims Act allows whistleblowers to bring complaints on the government’s behalf and share in potential damages. The law is a key weapon in the government’s arsenal for combating fraud, and the driving force behind a major share of healthcare recoveries.
The law requires tripling of damages, a stipulation that inflated CVS’ penalty. The company argued that the $948.8 million award violates the Constitution’s prohibition against excessive fines, but McMahon did not agree.
“Admittedly [the fine] is a very big number. 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 judge wrote.
And CVS is getting off relatively easy, McMahon noted. According to her order, following the letter of the FCA, which outlines a minimum penalty of $5,000 for every false claim, would result in an “astronomical” minimum penalty of $26.9 billion on top of the damages.
Still, CVS plans to appeal the judgment.
“This lawsuit centered on a highly technical prescription dispensing record keeping issue that was allowed by law in many states. The dispensing practices referenced were limited to Omnicare, ended in 2018, were used by many others in the industry at the time, and were accepted by CMS,” a spokesperson for the company said.
“There was no claim in this case that any patient paid for a medication they shouldn’t have or that any patient was harmed. The decision on penalties is unconstitutional, especially given the fact that there is no evidence that a single patient suffered harm,” they added.
If the healthcare juggernaut’s appeal fails, the penalty is small hit in comparison to its annual revenue, which reached $372.8 billion in 2024.
Still, it would mean a financial speedbump for CVS, which is struggling to adjust to reimbursement pressures in its legacy retail pharmacy business and higher medical costs for members in its Aetna health plans.
