CVS Agrees To Pay $37M To Settle Claims That It Fraudulently Billed Medicaid For More Costly Form Of Heartburn Medication

Main Category: Medicare / Medicaid / SCHIP
Also Included In: Litigation / Medical Malpractice
Article Date: 20 Mar 2008 - 10:00 PDT

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CVS Caremark on Tuesday agreed to pay $36.7 million to settle allegations that the company overbilled Medicaid for the antacid ranitidine, a generic version of Zantac, for more than six years, the Chicago Tribune reports (Sachdev, Chicago Tribune, 3/19).

According to federal prosecutors, CVS Caremark filled prescriptions for Medicaid beneficiaries with the capsule form of ranitidine, rather than the tablet form, from April 1, 1999, through Dec. 31, 2006 (AP/Baltimore Sun, 3/19). Medicaid establishes maximum reimbursement rates for the tablet form of ranitidine but not for the capsule form, which costs more and is prescribed less often. The switch to the capsule form of ranitidine allowed CVS Caremark to bill Medicaid for as much as 400% more than the amount they could have billed the program for the tablet form, according to federal prosecutors (Won Tesoriero/Armstrong, Wall Street Journal, 3/19). Under federal law, pharmacists cannot switch tablet and capsule forms of medications without permission from the physician who prescribed the treatments (Thomas, Chicago Sun-Times, 3/19).

The settlement will end a whistleblower lawsuit filed in 2003 in U.S. District Court for Northern Illinois (Wall Street Journal, 3/19). Bernard Lisitza, a pharmacist in Northbrook, Ill., filed the lawsuit, which the federal government, 23 states and Washington, D.C., later joined (Chicago Tribune, 3/19). Under the settlement, CVS Caremark will pay the federal government $21 million and pay the 23 states and Washington, D.C., $15.6 million. In addition, CVS Caremark will pay $800,000 for investigative costs and other fees (Heher, South Florida Sun-Sentinel, 3/19). Lisitza, who filed a similar whistleblower lawsuit that led to a $49.5 million settlement by Omnicare in 2006, will receive $4.3 million (Chicago Tribune, 3/19).

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CVS Caremark officials on Tuesday said that the company denied wrongdoing in the settlement and "agreed to settle ... in order to defray the distraction, burden and expense of continuing litigation" (Chicago Sun-Times, 3/19). In a statement, CVS Caremark said, "For many years, the company purchased and stocked the capsule form of ranitidine across its chain of retail stores for dispensing to all patients, not just Medicaid recipients, due to the fact that the acquisition cost of capsules was lower than the cost of tablets" (South Florida Sun-Sentinel, 3/19).

U.S. Attorney Patrick Fitzgerald in a statement said, "Switching medication from tablets to capsules might seem harmless, but when that is done solely to increase profit ... pharmacies must know that they are subjecting themselves to the possibility of triple damages, civil penalties and attorney fees" (Chicago Tribune, 3/19).

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