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Attorney General Kamala D. Harris Announces $1.8 Million Settlement with CVS Pharmacy for Overcharging Medi-Cal

Friday, April 22, 2011
Contact: (415) 703-5837

SAN FRANCISCO --- Attorney General Kamala D. Harris today announced a settlement with the drug store chain CVS Pharmacy, Inc. for overcharging the state’s Medi-Cal program for prescription drugs.

CVS Pharmacy will reimburse California more than $1.76 million as part of a $17.5 million settlement with the U.S. Department of Justice and nine other states, including Alabama, Florida, Indiana, Massachusetts, Michigan, Minnesota, New Hampshire, Nevada and Rhode Island.

“CVS chose to short-change taxpayers and undermine our healthcare safety net with these actions,” said Attorney General Harris. “We are all better off now that this deception has been uncovered.”

Starting in late 2002 and continuing through 2010, CVS submitted prescription drug claims to Medi-Cal for individuals who were covered by both Medi-Cal and a third-party insurance plan. The pharmacy should have first billed the primary insurer – and sought Medi-Cal reimbursement only for the remaining amount, typically the co-pay.

In 2008, a CVS pharmacist in Minnesota stepped forward to alert the authorities of the overbilling.

A multi-state investigation, in which billing and payment information was analyzed and cross-referenced to private insurance payment, found that CVS billed more than the amount allowed for so-called dual-eligible claims.

Investigating the case and negotiating the settlement with CVS were the California Attorney General’s Bureau of Medi-Cal Fraud and Elder Abuse, along with the U.S. Department of Justice, the U.S. Attorney’s Office for the Western District of Wisconsin, the U.S. Department of Health and Human Services - Office of Inspector General, and the attorneys general of the other settling states.

As part of the agreement, CVS will train its employees in accurate billing procedures. CVS has started working with individual states to make sure it bills correctly for dual-eligible beneficiaries. Pharmacy payments will also be audited on a regular basis by an independent review organization.

The funds recovered for California will be paid to the Department of Health Care Services to reimburse the state’s Medi-Cal program.

The California investigation and settlement negotiations were overseen by Supervising Deputy Attorney General Nicholas Paul and Deputy Attorneys General Erika Hiramatsu, Matt Kilman and Eliseo Sisneros.

A copy of the settlement agreement is available at ag.ca.gov.

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