PHILADELPHIA – CVS cannot dodge allegations it violated the False Claims Act and tried to defraud Medicare of billions of dollars by providing false price reports for prescription drugs, according to a Pennsylvania federal court.
On April 23, U.S. District Court for the Eastern District of Pennsylvania Judge Mitchell S. Goldberg ruled that relator Sarah Behnke provided enough detail in her complaint to allege that CVS’s failure to follow its mandate to report lower prices negotiated with pharmacies, caused Medicare to overpay $25 million in 2012 and $50 million in 2013.
Behnke, Aetna’s head actuary for Medicare Part D, alleged CVS billed the Centers for Medicare & Medicaid Services (CMS) for drugs at a higher price than it paid retail pharmacies.
Per the suit, she claimed that action violated federal law requiring pharmacy benefit managers to report so-called “pass-through” prices and that the fraudulent claims cost Medicare and patients billions of dollars dating back to 2007.
Behnke filed a whistleblower lawsuit as to the charges under seal in February 2014, which she was allowed to do in order to provide the federal government time to investigate her assertions, under the False Claims Act.
The complaint was temporarily unsealed more than four years later, in April 2018. Just months earlier, Aetna had announced plans of a near-$70 billion merger with CVS, which was then finalized in late 2018.
With the complaint now back under seal, CVS filed to dismiss the suit for failure to state a claim.
“Defendants contend that relator has failed to allege facts regarding Caremark’s specific pharmacy contracts, including the particular pharmacies involved, the specific prices for specific drugs negotiated, and the specific Caremark employees involved in negotiating these prices,” Goldberg said.
“Defendants explain that, while the complaint does allege that the inflated maximum allowable cost prices charged to Aetna were reported to CMS and not the prices actually negotiated with pharmacies, relator never identifies a ‘negotiated price’ paid to the pharmacy for a drug that was different from what was reported to CMS.”
But, Goldberg disagreed.
“Relator has pled the alleged theory of fraud with sufficient particularity. Relator claims that maximum allowable cost prices set by Caremark, charged to Aetna and reported to CMS, were higher than the prices actually paid to pharmacies by Caremark,” Goldberg stated.
“As the complaint alleges, the lower prices that Caremark negotiated with pharmacies were not disclosed to CMS as required, which then resulted in the submission of false claims to CMS and overpayment to Aetna.”
As to alleged violations of the False Claims Act lodged against defendant SilverScript Insurance Company, Goldberg threw them out for lack of specificity in the pleadings.
“Unlike relator’s allegations of the Caremark defendants’ fraudulent reporting as to Aetna, relator pleads no facts in support of SilverScript’s actual knowledge, deliberate ignorance, or reckless disregard for the truth or falsity of its price reporting,” Goldberg said.
On the subject that Behnke failed to show any obligation for the defendants to pay money to the government in the third count of her complaint, Goldberg agreed with the defendants and likewise dismissed that count to all defendants.
“Here, relator asserts that CMS used data submitted by Caremark on behalf of Aetna to reconcile payments made or due to Aetna for drugs dispensed to Medicare Part D beneficiaries that did not include, as required, the price concessions that Caremark received from pharmacies,” Goldberg said.
“Like the plaintiff in U.S. ex rel. Thomas v. Siemens AG, relator is alleging that Caremark failed to refund the false claims that the government paid, but a failure to refund is not the same as an affirmative obligation to pay the government.”
Goldberg is permitting Behnke to amend her complaint to correct any deficiencies.
U.S. District Court for the Eastern District of Pennsylvania case 2:14-cv-00824
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com