Caremark Settles FCA Suit for $137.5 Million

PHILADELPHIA (Sept. 8, 2005) – Caremark Rx, Inc., formerly known as AdvancePCS, Inc., has agreed to pay $137.5 million to settle landmark litigation brought against the pharmacy benefits manager by three whistleblowers. The landmark settlement comes as the Department of Justice and many States continue to scrutinize pharmacy benefits management industry practices.


The settlement, the first involving a federal False Claims Act suit against a pharmacy benefits manager (PBM), was unsealed on Thursday, September 8, by the Honorable Norma L. Shapiro, in the Eastern District of Pennsylvania in Philadelphia. With the court’s assistance, the parties negotiated a resolution of all claims pending against the federal government.


The complaints, the first of which was filed in 2002, alleges that the PBMs knowingly solicited and received inflated payments through ‘administrative fees’ and ‘services agreements’ from pharmaceutical manufacturers. These kickbacks were allegedly paid by the manufacturers in exchange for favorable treatment of their products under contracts with government programs, including the Federal Employees Health Benefit Program, the Mailhandlers Program and Medicare + Choice programs.  The lawsuits also allege that improper kickbacks were paid by AdvancePCS and Advance Paradigm to existing and potential customers as an inducement to their signing contracts with the PBMs.  All of this, the complaint alleged, led to the submission of false claims to the federal government. Caremark Rx, while agreeing to the settlement, specifically denies any liability or wrongdoing in connection with these cases.


The Washington, D.C. office of Robins, Kaplan, Miller & Ciresi L.L.P. represented two former executives of AdvancePCS, Inc. and one former executive of Advance Paradigm. Assisted by Kreindler & Associates, acting as local counsel, the firms filed suits against AdvancePCS and Advance Paradigm under the federal False Claims Act on behalf of the United States.  The False Claims Act allows private citizens to sue individuals and companies they believe have defrauded the government. Caremark Rx, Inc., which purchased AdvancePCS, Inc. in 2004, inherited the claims brought in these suits. 

   

“This sends a powerful message to the pharmacy benefits management industry that it needs to be far more transparent in its actions,” said Scott Simmer, a partner with Robins, Kaplan, Miller & Ciresi L.L.P. “Each of these individuals came forward because they thought it was the right thing to do. They put their careers and their families on the line and are delighted with the result in this case.” 


“Although this is the first settlement over PBM practices, it won’t be the last,” said Mitch Kreindler of Kreindler & Associates. Kreindler notes that his firm represents one of the relators in another False Claims Act case, also pending in Philadelphia, against Medco Health Solutions. The Department of Justice has intervened in that action and litigation is proceeding against Medco.

Not dismissed in the Caremark settlement are whistleblower claims on behalf of 10 states.

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