CVS Health and its subsidiaries are facing significant legal challenges this week stemming from both federal and state actions targeting their pharmacy benefit management practices.
On the federal level, a former actuary at Aetna’s Medicare division secured a $95 million False Claims Act judgment against Caremark, CVS’s pharmacy benefit manager (PBM). The whistleblower alleged that Caremark caused health insurers to inaccurately report drug costs to the federal government, thus inflating the reported prices for Medicare Part D beneficiaries. At the heart of the complaint was the claim that Caremark paid pharmacies a fixed average price for prescription drugs but directed insurers to report inflated costs, ultimately misleading the government.
The lawsuit, which also named SilverScript Insurance, Walgreens, and Rite Aid, focused particularly on Caremark’s contracts with CVS pharmacies from 2013 to 2016. These contracts lacked formal generic effective rate (GER) guarantees—agreements to average drug prices over time. Instead, Caremark and CVS operated on “budgeted GERs,” developed internally by CVS executives to align corporate financial projections. These figures were adjustable and not legally binding, unlike contractual GERs, and were not subject to reconciliations or clawbacks if discrepancies occurred. For example, the court found that Caremark failed to provide a true-up payment in 2015, even though actual payments fell below the budgeted GER.
The judge ruled that the internal dealings between CVS and Caremark were not conducted at arm’s length. Rather, the decisions appeared to benefit CVS Health as a unified parent company rather than operating through independent negotiations between subsidiaries.
Simultaneously, in Louisiana, Republican Attorney General Liz Murrill launched three separate lawsuits against CVS Health and Caremark, accusing the companies of deceptive and unethical conduct. One suit centers on a June 11 text campaign in which CVS contacted customers, urging them to oppose state legislation that would prohibit PBMs from owning pharmacies. CVS warned that the bill could force the closure of 119 stores, affect one million patients, and eliminate 2,700 jobs. Critics, including Governor Jeff Landry, condemned the texts as fearmongering and a misuse of private health information for political lobbying. Murrill accused CVS of using prescription data to push a corporate agenda under the guise of health communications.
The second lawsuit challenges Caremark’s role in drug pricing, alleging that the PBM uses its market dominance and complex rebate structures to obscure true costs and engage in “double-dipping” with administrative fees. A third legal action accuses CVS of imposing exorbitant fees on rival pharmacies, using spread pricing tactics and leveraging its network power to restrict competition.
Together, the federal judgment and Louisiana lawsuits paint a picture of growing scrutiny over CVS’s PBM practices and their impact on drug prices and market fairness.
