The court trebled the government’s actual damages and required Caremark to pay civil penalties near the top of the statutorily allowed range.
On August 20, 2025, a federal judge in the Eastern District of Pennsylvania ruled that Caremark should pay nearly $290 million in damages and penalties for overbilling the government for Medicare Part D drugs.
Judge Mitchell S. Goldberg issued an initial opinion on June 25, 2025, holding that Caremark, CVS Health’s pharmacy benefit manager (PBM), defrauded the government by misreporting the amount it reimbursed pharmacies for the drugs dispensed to Medicare beneficiaries. The scheme resulted in Medicare paying an excess and unnecessary amount totaling approximately $95 million. The case was initiated by a whistleblower—an actuary at Aetna named Sarah Behnke—who identified that Aetna was not paying the same price for Medicare Part D drugs as Caremark’s other clients.
Under the False Claims Act, damages include actual damages, civil penalties and treble damages. In his initial opinion issued in June, Judge Goldberg reserved making a decision on damages pending briefing by the parties. On August 20, the judge decided the issue of civil penalties and treble damages.
The court trebled the government’s actual damages and required Caremark to pay civil penalties near the top of the statutorily allowed range. Judges have discretion to award civil penalties within a certain range based on the gravity of the violation. Caremark argued that the judge should award minimum penalties because it only committed fraud involving two large pharmacy chains. Behnke argued that it would be “absurd” to limit damages because Caremark did not commit fraud at the numerous independent pharmacies under its influence—and Judge Goldberg agreed.
The judge emphasized the severity of Caremark’s conduct, noting it had the potential to undermine public confidence in the government. Widespread fraud could create the impression that Medicare’s resources are poorly administered.
Caremark raised additional constitutional arguments in attempting to combat the amount of the judgment. Caremark argued that the judgment (1) violated the Eighth Amendment’s excessive fines clause and (2) that the penalties were so large as to violate due process. The judge found Caremark’s argument unpersuasive. Nonetheless, Caremark’s focus on constitutional issues foreshadows a likely appeal of the judgement.
The amount of the judgment is substantial. Last fiscal year, settlements and judgments under the False Claims Act totaled approximately $2.9 billion. The judgment against Caremark alone approaches 10 percent of that amount. Moreover, the judgment represents increased enforcement activity by the federal government against PBMs such as Caremark.
This case arose from Caremark’s failure to comply with a change in Medicare’s policies intended to curtail opaque pricing practices. The judgment comes at the same time legislatures across the country are reforming regulations meant to reel in abusive practices by PBMs. This case and Judge Goldberg’s judgment further demonstrate to PBMs the consequences of failing to keep up with changes in the law and the increased scrutiny PBMs are now facing from federal agencies.
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