The Case - Summary

By paying $36.7 million, CVS settled allegations that it unlawfully defrauded Medicaid by switching prescriptions for ranitidine, the generic form of the brand-name drug Zantac®. The United States, 23 states and the District of Columbia, and qui tam Relator Lisitza claimed that CVS improperly caused its pharmacies to switch Medicaid patients' prescriptions from ranitidine tablets to ranitidine capsules in order to charge the government a higher price.

The conduct covered by the settlement lasted for more than six years, from April 1, 1999 through December 31, 2006. The Complaint was brought by the Relator in 2003, under federal and state False Claims Acts, after he witnessed the conduct and reported the problem to the government. The investigation and prosecution was led by the Attorneys General Offices in Massachusetts, Illinois, Ohio and several other states, and by the United States Attorney's Office in Chicago. Relator Lisitza pursued the case with the assistance of his attorneys, Michael I. Behn and Linda Wyetzner, of Behn & Wyetzner, Chartered in Chicago.

According to the government, CVS switched the drugs because the United States and various individual states had imposed price limits for the amounts that Medicaid would pay for the tablet form of ranitidine. By substituting capsules for tablets, CVS received substantially higher reimbursement amounts from various state Medicaid programs. The Complaint states that the switches resulted in the government paying CVS as much as four times more for ranitidine capsules than for tablets.

Ranitidine tablets were the standard form of the medication. Capsules were rarely prescribed. Legally, tablets and capsules are different drugs, and state pharmacy laws generally prohibit substituting tablets for capsules.

As different drugs, tablets and capsules also have different prices. State Medicaid regulations determine how much a pharmacy is paid for a particular prescription. States follow federal Medicaid reimbursement limits, when they are set by the federal government for certain popular generic drugs. The United States, through the Centers for Medicare & Medicaid Services ("CMS") sets a Federal Upper Limit price for ranitidine tablets. State Medicaid programs followed these federal price limits. There was no price limit for capsules, as they were virtually never prescribed.

The case alleges that CVS's ranitidine switching violated federal and state False Claims Acts. False Claims Acts prohibit submitting false or fraudulent claims to the government. Here, the United States, individual states and Relator Lisitza alleged that CVS violated federal and state False Claims Acts by claiming Medicaid reimbursements for ranitidine capsules when the lower-priced ranitidine tablets should have been provided.

False Claims Acts are designed to deter fraud against the government, and provide substantial remedies against those who lie, cheat and steal from the public treasury. The government can collect up to three times the amount it was defrauded in addition to civil penalties of $5,500 to $11,000 per false claim.

Major recoveries have been achieved through the incentives and protections designed to encourage whistleblowers to come forward with information about fraud against the government. Whistleblowers can receive a substantial percentage of the recovery, ranging from 15 to 25 percent when the government pursues the case with the whistleblower. Pharmacists like the Relator in this case have brought numerous successful actions, resulting in hundreds of millions of dollars in recoveries of government payments.