CVS Pharmacy Inc. Pays $18.2 Million to Resolve Alleged False Claims Act Violations

CVS Pharmacy Inc. has paid a total of $18,282,280 to the United States and the State of California to resolve allegations that the company violated the Federal False Claims Act and the California False Claims Act when it knowingly submitted claims for reimbursement for certain prescribed medications to California’s Medi-Cal program that were not supported by applicable diagnosis and documentation requirements, U.S. Attorney Eric Grant announced today.

CVS is among the largest pharmacy chains in the United States, with more than 9,000 locations nationwide and more than 1,000 stores in California. CVS submits reimbursement claims for medications dispensed to beneficiaries of the Medi-Cal program—California’s Medicaid health care program administered by the California Department of Health Care Services (DHCS). Medi-Cal relies on both federal and state funding to provide health care to millions of Californians, including those with low incomes and disabilities.

Medi-Cal utilizes a “formulary” list that designates restrictions for certain listed drugs, including restrictions pertaining to diagnoses and required documentation that must be confirmed by the pharmacy before the drug can be prescribed. Drugs listed on the Medi-Cal formulary are commonly referred to as “Code 1” drugs. Medi-Cal will reimburse certain Code 1 drugs only for approved diagnoses, taking into account criteria such as the drug’s safety, efficacy, misuse potential, and cost. Pharmacies such as CVS serve the critical gatekeeping function of confirming and certifying that these Code 1 drugs are dispensed for the approved diagnoses. CVS may bill for drugs prescribed outside of the approved diagnoses, but it must submit a request to DHCS that includes a justification for the nonapproved use.

Today’s settlement resolves allegations that CVS failed to confirm and document the requisite diagnoses, and in some instances dispensed drugs for nonapproved diagnoses, then knowingly billed Medi-Cal for those prescriptions.

“This settlement demonstrates our commitment to protect the integrity of this critically important federal-state program serving low-income and disabled citizens of this District,” said U.S. Attorney Grant. “My office will continue working to ensure that pharmacies comply with important program regulations like those at issue here.”

“Proper billing of federal health care programs is essential and underpins the reliability of our health care system. Oversight is key to ensuring that compliance failures are remedied,” said Acting Chief Counsel to the Inspector General Susan Gillin of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “Although CVS entered into a health care fraud settlement with the United States, CVS did not agree to compliance-related oversight with HHS-OIG through a corporate integrity agreement.”

This settlement includes the resolution of claims brought by a former CVS pharmacist under the qui tam or whistleblower provisions of the Federal False Claims Act. Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery from that action. The qui tam case is captioned: U.S., et al. ex rel. Zimniski v. CVS Health Corporation, no. 2:19-cv-1118 (E.D. Cal.). As part of the settlement announced today, the whistleblower will receive approximately $3.3 million of the recovery proceeds.

This settlement is the result of a joint effort by the United States Attorney’s Office for the Eastern District of California and California’s Department of Medicaid Fraud and Elder Abuse, with assistance from HHS OIG and the Federal Bureau of Investigation. Assistant U.S. Attorney Catherine Swann handled the case for the U.S. Attorney’s Office.

The claims resolved by this settlement are allegations only, and there has been no determination of liability.

Note: View the settlement agreement here: