The United States Attorney for the Southern District of New York, Jay Clayton, announced a $37.76 million settlement with CVS Pharmacy, Inc. to resolve allegations that the company over-dispensed insulin pens and improperly billed government healthcare programs between 2010 and 2020.
According to federal authorities, CVS violated the False Claims Act by seeking reimbursement from Medicare, Medicaid, TRICARE, and the Federal Employees Health Benefits Program for premature refills and quantities of insulin pens exceeding patients’ prescription needs. The government also alleged that CVS under-reported the days-of-supply dispensed to patients, which prevented pharmacy benefit managers (PBMs) from detecting early refills.
Under a settlement approved by U.S. District Judge John G. Koeltl, CVS will pay $24,446,240 to the United States and the remainder to various states. As part of the agreement, CVS admitted responsibility for certain conduct described in the complaint.
“CVS engaged in a decade-long practice of repeatedly prematurely refilling insulin prescriptions for patients and improperly billing government healthcare programs for more insulin than patients needed,” said U.S. Attorney Jay Clayton. “These programs rely on pharmacies to follow appropriate refill schedules and to accurately report the amount of medicine dispensed, which CVS pharmacies frequently failed to do. This settlement reflects our continued commitment to holding pharmacies to account, enforcing rules designed to keep costs down, and protecting taxpayer dollars.”
Naomi D. Gruchacz, Special Agent in Charge at HHS-OIG’s New York Regional Office added: “Companies that participate in federal health care programs are required to obey laws meant to protect the integrity of program funds, including the responsibility to bill only for services and supplies eligible for reimbursement. Working closely with our law enforcement partners, HHS-OIG will continue to investigate allegations of improper billing to safeguard our taxpayer-funded federal healthcare system and the millions of enrollees who rely on its programs.”
Christopher M. Silvestro of DCIS commented: “Investigating false claims against TRICARE, the healthcare system for military members and their families, is a top priority for the Defense Criminal Investigative Service, the criminal investigative arm of the Department of Defense’s Office of Inspector General. This announcement underscores our commitment to working with our law enforcement partners and the Department of Justice to protect TRICARE against unwarranted and fraudulent expenses.”
Derek M. Holt from OPM-OIG stated: “Knowingly submitting claims for medically unnecessary insulin refills exploits benefits that federal employees rely on to manage their health, increasing the cost of care and wasting taxpayer dollars. We thank our agents, law enforcement partners, and the Department of Justice for their dedication to investigating and pursuing these improper billing practices that undermine the Federal Employees Health Benefits Program.”
Insulin pens are commonly used by diabetic patients as a method for self-administering insulin; they are typically sold in five-pen cartons with each pen containing 300 units (3 mL) of solution. Prescriptions specify both dosage amounts and administration frequency.
Pharmacies must report both quantity dispensed and days-of-supply when seeking reimbursement from government healthcare plans (GHPs). PBMs use this information—along with automated processes—to enforce limits on supply quantities (often a 30-day maximum) and prevent premature refills before most previously dispensed medication has been consumed.
The complaint alleges that from January 1, 2010 through December 31, 2020 (“Covered Period”), CVS knowingly submitted false claims by dispensing more insulin than prescribed or needed by beneficiaries enrolled in GHPs; refilled prescriptions substantially before necessary; under-reported days-of-supply; and failed compliance with applicable rules regarding calculation of refill dates.
To expedite filling prescriptions—and avoid claim rejections—CVS instructed staff to report only maximum allowed days-of-supply rather than actual supply dispensed when submitting claims after full carton dispensing triggered system rejections due exceeding plan limits. Many stores did not document or track actual supply provided nor adjust refill intervals accordingly; instead relying on software-generated dates based on inaccurate data—which led some customers accumulating excess unused insulin.
Audits conducted by PBMs throughout this period identified repeated violations at CVS locations such as invalid reporting practices or premature refills resulting in chargebacks issued against CVS management was aware that insulin pens were frequently cited among products subject chargebacks but did not take sufficient corrective action during this time frame.
CVS admitted several key points as part of its settlement:
– Many stores did not break open cartons when dispensing pens—sometimes providing more than allowed.
– When claims were rejected due supply limits being exceeded some stores resubmitted using maximum allowed values without obtaining required overrides.
– The company’s auto-refill program sometimes prompted customers too early due inaccurate recording practices.
– Some GHPs paid substantial sums for unnecessary refills while beneficiaries received more medication than needed.
The government joined five private whistleblower lawsuits filed under seal pursuant to the False Claims Act as part of this case.
Jay Clayton praised investigative efforts by HHS-OIG, DOD-OIG, OPM-OIG as well as those from Veterans Affairs OIG and U.S Postal Service OIG involved in resolving this matter.
Assistant U.S. Attorney Pierre Armand is leading prosecution within SDNY’s Civil Frauds Unit.
