CVS Caremark, one of the largest pharmaceutical chains in the United States, will pay $4.25 million to settle allegations that it knowingly failed to reimburse Medicaid for prescription costs paid for Medicaid recipients. The lawsuit was originally filed by Janaki Ramadoss, a former quality assurance representative with Caremark, under the qui tam or whistleblower provisions of the federal False Claims Act.

“It is vitally important that cash-strapped Medicaid programs receive reimbursement for costs they incur that should have been paid for by other insurers,” assistant Attorney General, Stuart F. Delery, said in a statement. “We will take actions against those who seek to gain at the expense of Medicaid and other federal health care programs.

According to the terms of the settlement, the federal government will receive $2.31 million and state governments – Arkansas, California, Delaware, Louisiana and Massachusetts – will divide $1.94 million. Ramadoss will receive approximately $505,680 from the federal share of the settlement and residual amounts from the individual states.

“Health care fraud is a pervasive problem that both federal and state governments are actively seeking to stamp out,” commented Christopher Paulos, an attorney with the Levin, Papantonio law firm who practices in the areas of qui tam or whistleblower law and False Claims Act litigation. “Often, without the efforts of a whistleblower – someone with knowledge of an entity making false claims for payment to the government – corruption like this would go unchecked.”

In this case, Caremark is alleged to have used a computer system called “Quantum Leap” to ignore when a customer had a third-party payer that was eligible to cover a prescription. This would cause Medicaid to pay for prescriptions that another insurer was responsible for.

Since its inception in 2009, the Health Care Fraud Prevention and Enforcement Action Team (HEAT) has, in coordination with the Department of Justice, recovered more than $12.1 billion in fraudulent gains.

Joshua is a writer and researcher with Ring of Fire. You can follow him on Twitter @Joshual33.