An associated business of the national pharmacy chain that recently took on all the former Tri-City customers of bankrupt Rite Aid is facing its own legal issues with sizable financial consequences. 

A federal judge in Pennsylvania on Aug. 19 handed down a $289 million penalty on CVS Caremark after finding the company, in its capacity as a pharmacy benefits manager, intentionally had two of its subsidiaries misrepresent how much Medicare beneficiaries paid for their prescriptions at Rite Aid and Walgreens stores in 2013 and 2014, according to court documents.  

CVS Caremark and CVS Pharmacy are part of parent company CVS Health. As a pharmacy benefits manager, CVS Caremark administers prescription drug benefits for various insurance plan providers. 

CVS Health purchased more than 60 of Rite Aid’s stores, including all those in the Tri-Cities, as it dissolved as part of its bankruptcy proceedings earlier this year. All but one of those pharmacy locations have since closed, with only the store at the intersection of Highway 395 and Kennewick Avenue in Kennewick remaining open as a CVS. 

The Medicare fraud case was initiated by a claim from a whistleblower, called the relator in court proceedings, that had worked for one of CVS Caremark’s subsidiaries. Judge Mitchell Goldberg found CVS Caremark caused the U.S. Centers for Medicare and Medicaid to overpay for billed prescriptions by roughly $95 million. He also said it was clear the company’s actions were intentional and that it attempted to conceal them. 

As a result, the judge tripled the amount that CVS Caremark defrauded Medicare and tacked on a $4.9 million civil fine. 

“...Caremark urges that minimum penalties should be awarded because I found liability only as to two pharmacies over a two-year period,” Goldberg wrote in his final order. “Relator responds that it is ‘absurd’ to ‘credit (Caremark) for not committing fraud at the thousands of small, independent pharmacies over which Caremark had significant leverage ... I agree with Relator that Caremark should not pay less because it only committed fraud with respect to two of the largest pharmacy chains in the country.” 

Media outlets have reported that CVS Caremark plans to appeal Goldberg’s ruling.