CVS To Pay $17.5 Million In Medicaid Settlement

The US Justice Department announced today that CVS Pharmacy, Inc. will pay $17.5 million to settle allegations it overcharged Medicaid programs in 10 states and, according to Attorney General Peter F. Kilmartin, Rhode Island will get its share at around $560,000.

CVS Pharmacy operates over 7,000 retail pharmacies across the country and is based here in Woonsocket. 

The case began when Stephani LeFlore, a pharmacist in St. Paul, Minnesota, reported that her CVS pharmacy was charging Medicaid inflated prescription prices. LeFlore reportedly has been rewarded 16% of the total recovery or $2.6 million for acting as a whistleblower.

As part of the agreement, CVS denies any wrongdoing in the matter. A statement issued by the company earlier today states, "CVS/pharmacy did not intentionally overcharge any state Medicaid program."

The settlement will recover more than $1 million in federal and state dollars paid for prescriptions drugs for Rhode Island Medicaid beneficiaries and Rhode Island will retain $558,884 in state monies. 

“The state has an obligation to ensure that every taxpayer dollar is properly spent.  Since Medicaid is one of the largest expenditures for the State of Rhode Island, and, with Medicaid costs continually rising year over year, it is simply good practice for us to ensure that we keep an eye on the purse strings and hold accountable those who do not follow the rules," said Kilmartin in a press release. Other states listed in the settlement were Alabama, California, Florida, Indiana, Massachusetts, Michigan, Minnesota, New Hampshire, and Nevada.

The case involved the company's handling of dual-eligible beneficiaries--Medicaid beneficiaries who also have third-party prescription coverage (other than Medicare.) Pharmacies must bill the other insurer first, and submit a claim to Medicaid for only the amount of any remaining liability, typically the co-pay.  The investigation showed that CVS billed more than the allowed amount for certain dual-eligible claims, resulting in excessive reimbursement.

"The Company regularly receives reimbursement from Medicaid and believes it is in compliance with each state’s billing requirements for dual eligible patients.  Dual eligible patients with third party insurance coverage comprise a small percentage of the Medicaid patient population and this matter involves only certain state Medicaid programs," explains the CVS press release on the matter.

Investigation of the case involved complex analysis of billing and payment information, cross-referenced to private insurance payments.  The states assisted the U.S. Department of Justice, the U.S. Attorney's Office in the Western District of Wisconsin, and the U.S. Department of Health and Human Services – Office of Inspector General in investigating and negotiating a resolution of the case. 

As part of the settlement, an existing Corporate Integrity Agreement will be amended to require CVS to implement correct billing procedures and train employees. An independent review organization will regularly audit payments and issue reports on CVS’s compliance.  CVS has started working with individual state Medicaid offices to make sure it bills correctly for dual-eligible beneficiaries. 

"Rhode Islanders are suffering economically, and it is shameful that corporations add further fiscal stress on them for their own corporate gain,” Kilmartin said.

The Medicaid Fraud Control and Patient Abuse Unit enforces the laws pertaining to fraud in the federal/state Medicaid program and prosecutes cases of abuse, neglect or mistreatment of patients in all state healthcare facilities.  The Unit prosecutes criminal activity, pursues civil remedies where appropriate and participates with federal and state authorities in a variety of inter-agency investigations and administrative proceedings.

Since January, 2011, the Attorney General has recovered more than $924,742.51 on behalf of Rhode Island’s Medicaid program.