CVS Health’s pharmacy benefit manager, Caremark, has been fined nearly $290 million following a whistleblower lawsuit that accused the company of overcharging Medicare. This major development highlights growing scrutiny on pharmacy benefit managers (PBMs) and the role of whistleblowers in exposing fraud in government programs.
CVS Caremark Hit With Massive Fine
A federal judge in Philadelphia significantly increased the penalties against Caremark, CVS Health’s PBM arm. The company had previously been ordered to pay $95 million in damages, but in August 2025, Chief Judge Mitchell Goldberg tripled the amount to $285 million. On top of that, civil penalties totaling $4.87 million were added, bringing the total to nearly $290 million.
The case centered on allegations that Caremark submitted inflated drug pricing data to Medicare Part D, causing overpayments from the federal government between 2010 and 2014. The judge found that Caremark acted with reckless disregard and willful ignorance, even if there was no direct evidence that top executives intentionally committed fraud.
CVS Health has responded by calling the judgment excessive and is preparing to appeal the decision. However, the court has ruled that post-judgment interest will accrue daily, potentially increasing the financial burden as the appeal progresses.
The Whistleblower Behind the Case
The case was originally brought in 2014 under the False Claims Act by Sarah Behnke, a former actuary at Aetna. Behnke had deep knowledge of Medicare Part D drug pricing and alleged that Caremark was manipulating data submitted to the Centers for Medicare & Medicaid Services (CMS).
She claimed that Caremark reported higher drug prices to the government while paying pharmacies a lower amount, keeping the difference as profit. This practice, often referred to as “spread pricing,” is controversial and has been a growing concern in the PBM industry.
Behnke’s lawsuit was filed under the qui tam provisions of the False Claims Act, which allow private individuals to sue on behalf of the government and potentially share in any recovered damages. Whistleblowers in such cases can receive between 15% to 30% of the final judgment.
How the Fraud Allegedly Worked
At the heart of the case was how Caremark submitted cost data to Medicare. CMS relies on accurate drug pricing information from insurers to determine reimbursements. When PBMs like Caremark distort this data, it leads to inflated reimbursements, costing taxpayers significantly more than necessary.
The judge found that while there might not have been direct evidence of fraudulent intent at the executive level, the actions showed deliberate ignorance of federal regulations. By manipulating drug price submissions over multiple years, Caremark contributed to systemic overpayments under Medicare Part D.
This case underscores the broader risks of opaque pricing practices in the PBM industry. Many stakeholders, including lawmakers and watchdog groups, have raised concerns that the lack of transparency in drug pricing harms both public programs and consumers.
Legal Impact of the False Claims Act
The False Claims Act is one of the most powerful tools the government has to combat fraud. Under its provisions, damages can be tripled, and additional civil penalties can be imposed for each false claim submitted. This structure is designed to both punish and deter future misconduct.
In this case, the original $95 million in damages was multiplied by three, as allowed under the Act. Civil penalties were also added, reflecting the number of false claims involved.
Judge Goldberg emphasized that the harm went beyond financial loss. He noted that Caremark’s actions undermined the public’s trust in the Medicare system and the accuracy of CMS’s data.
CVS’s Response and Next Steps
CVS Health has stated that it strongly disagrees with the court’s decision. A company spokesperson said CVS was pleased that the judge dismissed claims against the parent company, CVS Health, and its retail pharmacy division. However, the company is disappointed with the final ruling against Caremark and plans to appeal.
CVS has also defended its broader practices, arguing that it complies with all legal and regulatory requirements. In other cases, the company has emphasized that no patients were harmed by its actions and that it seeks to provide affordable access to medications.
Still, the scale of the penalties—and the fact that CVS has faced multiple recent legal challenges—puts the company under renewed pressure to reassess its internal controls and compliance efforts.
A Pattern of Legal Trouble
This isn’t the only major legal issue CVS is facing. Just a month before the Caremark ruling, another unit of CVS—Omnicare—was ordered to pay nearly $949 million in a separate case involving fraudulent billing practices.
That case involved allegations that Omnicare submitted over 3 million invalid drug claims for patients in long-term care facilities between 2010 and 2018. CVS is also appealing that ruling.
These back-to-back judgments have sparked wider concerns among regulators and lawmakers, particularly about how large healthcare companies manage compliance with federal programs.
The Larger Conversation on PBMs
The Caremark case comes amid growing calls for reform in the PBM sector. Pharmacy benefit managers play a key role in negotiating drug prices, managing pharmacy networks, and controlling which drugs are covered by insurance plans. But critics argue that their pricing practices often lack transparency and accountability.
PBMs can generate profits by creating spreads between what they charge insurers and what they pay pharmacies. This model has led to calls for more transparency and for regulations that would limit spread pricing or require clearer reporting to government agencies.
Some states have already begun investigating PBMs and introducing legislation to regulate their operations. At the federal level, bipartisan interest in drug pricing reform could gain new momentum following the Caremark ruling.
What This Means for Medicare and Taxpayers
The Caremark fine has major implications for the Medicare Part D program, which provides prescription drug coverage for tens of millions of Americans. Overpayments due to inaccurate drug pricing data drain taxpayer funds and reduce the effectiveness of government oversight.
CMS relies heavily on the honesty of PBMs and insurers when calculating reimbursements. This case shows what can go wrong when that trust is violated. It also demonstrates the importance of whistleblowers and judicial enforcement in maintaining the integrity of public programs.
For patients and taxpayers alike, the outcome serves as a reminder that corporate accountability in healthcare is more than just a legal issue—it directly impacts the affordability and reliability of essential services.
Conclusion
The nearly $290 million Caremark Medicare fraud fine is one of the largest False Claims Act penalties against a pharmacy benefit manager in recent years. It highlights the dangers of opaque pricing practices and the critical role of whistleblowers in uncovering fraud.
While CVS Health plans to appeal the ruling, the case has already sent a strong message to the healthcare industry. Compliance, transparency, and accountability are not optional, especially when billions in taxpayer dollars are at stake.
This judgment is likely to fuel ongoing efforts to reform the PBM industry and strengthen protections within Medicare. As lawmakers, regulators, and industry leaders respond to the case, it may mark a turning point in how drug pricing is managed and monitored in the United States.
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