Drug Litigation Newsroom

CVS Caremark Corp. to Pay $36.7 Million to U.S., 23 States, & D.C. to Settle Medicaid Prescription Drug Fraud Allegations

WASHINGTON – CVS Caremark Corp. has agreed to pay $36.7 million to settle claims that the company from 2000 to 2006 improperly switched patients from the tablet version of the prescription drug Ranitidine (generic Zantac) to a more expensive capsule version in order to increase Medicaid reimbursement, the Justice Department announced today. CVS Caremark, based in Woonsocket, R.I., operates more than 6,000 retail pharmacies nationwide.

By dispensing the capsule version of Ranitidine rather than tablets, CVS Caremark was able to substantially increase its reimbursement from Medicaid while providing no additional medical benefit to beneficiaries. For example, during the period Dec. 15, 2000, through April 1, 2001, Caremark charged Illinois Medicaid $79.80 for 60 Ranitidine capsules instead of $17.10 for the tablets, leading to a price difference of $62.70 on a single prescription.

“This settlement represents our continuing commitment to vigorously prosecute fraud in government health care programs,” said Jeffrey S. Bucholtz, the Acting Assisting Attorney General for the Civil Division. “The United States will not tolerate pharmacies or any other health care providers that attempt to manipulate the Medicaid program to fill their coffers at the taxpayers’ expense.”

CVS Caremark will pay $36.7 million to resolve a whistleblower lawsuit filed in 2003 by Bernard Listiza, a licensed pharmacist. The federal share of the settlement is approximately $21.1 million. Twenty-three states and the District of Columbia will share $15.6 million pursuant to separate settlement agreements. Mr. Lisitza will receive $4,309,330.74 as his share of the federal and state settlements.

“Switching medication from tablets to capsules might seem harmless, but when that is done solely to increase profit and in violation of federal and state regulations that are designed to protect patients, pharmacies must know that they are subjecting themselves to the possibility of triple damages, civil penalties and attorney fees,” U.S. Attorney Patrick Fitzgerald said. “These penalties, coupled with the willingness of insiders to report fraud, should deter such misconduct, but when it doesn’t, the result in this case and others serves notice that we will aggressively pursue all available legal remedies.”

CVS Caremark has also entered into a compliance agreement with the U.S. Department of Health and Human Services to ensure that CVS Caremark does not improperly switch drugs in the future. The compliance agreement will be in effect for five years.

The U.S. Attorney’s Office in Chicago supervised the joint federal and state health care fraud investigation with assistance from the Justice Department’s Civil Division; the National Association of Medicaid Fraud Control Units; the Office of Inspector General for the U.S. Department of Health and Human Services; the Federal Bureau of Investigation; and the U.S. Food and Drug Administration.