RxAmerica and CVS: Lower Prices on Plan Finder, Higher Prices on Claims

In the RxAmerica Medicare Plan Finder settlement, RxAmerica agreed to pay $5.25 million over allegations that it submitted false generic-drug prices for Medicare’s plan-comparison tool. The government alleged that the company received Part D payments on claims priced significantly higher than the figures it supplied for beneficiaries choosing a plan. For someone working with plan pricing, claims or Medicare submissions, the case turns on a familiar question: which version of the price left the company, and who relied on it?

RxAmerica LLC was a wholly owned subsidiary of CVS Caremark Corporation providing Medicare prescription drug benefits. The Justice Department announced the agreement on October 15, 2012, describing it as one of the first False Claims Act settlements involving Part D. This case of alleged drug pricing fraud began with the prices beneficiaries used to decide where to enroll.

What Plan Finder Was Supposed to Show

Plan Finder displayed estimated prescription drug prices for the Part D plans a beneficiary was considering. The Centers for Medicare & Medicaid Services populated the tool with pricing data supplied by each plan sponsor. The government ran the comparison website. The companies competing for enrollment supplied the numbers.

Part D coverage came through Medicare-approved plans, with differences in covered drugs, reimbursement amounts, deductibles and copays. The private-plan business competes for enrollees on premiums, benefits, covered therapies and pharmacy networks.

The U.S. Attorney’s account of the case explains why those estimates mattered under the benefit rules then in place. After an initial deductible and a period of shared costs, beneficiaries could reach a coverage gap commonly called the donut hole. In that gap, they paid the full prescription cost. Once their spending reached the next threshold, catastrophic coverage shifted almost all prescription costs to the plan and ultimately Medicare.

Plan Finder was intended to help beneficiaries choose a plan that reduced their likelihood of reaching that gap. A low estimate therefore spoke to more than the next pharmacy bill. It shaped expectations about how far the coverage would last.

The Alleged Price Mismatch

The government alleged that RxAmerica submitted false prices for certain generic drugs from January 1, 2007, through December 31, 2008, despite certifying to the Centers for Medicare & Medicaid Services that its Plan Finder pricing data would be accurate. It also alleged that RxAmerica received Medicare payments on claims whose drug prices were sometimes significantly higher than those submissions.

The beneficiary account makes that mismatch concrete. According to the U.S. Attorney’s announcement, one whistleblower allegedly expected a drug to cost $50 a month but faced charges of approximately $250 a month and entered the coverage gap. The whistleblowers further alleged that the price differences likely pushed other beneficiaries unexpectedly into the gap and then catastrophic coverage, causing losses to Medicare.

Which Drug Price Was Being Reported?

The American Journal of Health-System Pharmacy’s 2004 commentary Examining the value of pharmacy benefit management companies describes contractual differences between the ingredient cost paid to a dispensing pharmacy and the cost charged to a payer for the same prescription.

That spread between pharmacy and payer amounts explains why identifying the price field matters. In the RxAmerica allegations, the central comparison was the sponsor’s estimate submitted for Plan Finder against prices on covered-drug claims. We work with whistleblowers to connect each number to its purpose, its recipient and the underlying prescription.

Two Complaints, One Resolution

Two separate qui tam complaints led to the RxAmerica resolution, one of them also naming parent CVS Caremark.

The whistleblowers were Medicare Part D beneficiaries who had chosen the RxAmerica-sponsored plan after reviewing Plan Finder. One described the difference between the expected price and the charge. That account put the enrollment decision and the later prescription cost into the same story.

For pharmaceutical whistleblowers, this case shows the value of knowing both sides of a reported price. A beneficiary saw the comparison and the bill. A pricing or claims employee may understand how the company produced those numbers and what happened when they diverged.

The Justice Department Payment and the Separate FTC Settlement

RxAmerica’s civil agreement committed a payment to the United States. A separate Federal Trade Commission agreement with parent company CVS, reached earlier in 2012, required a $5 million payment over allegations concerning inaccurate Plan Finder submissions from late 2007 through 2008. The Justice Department’s announcement described that FTC settlement as funding compensation for beneficiaries.

The different recipients reflect the two sides of the alleged harm: misleading prices affected people’s coverage choices, and the resulting drug costs affected Medicare.

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers.

What Evidence Is Needed to Prove Fraud?

For a Plan Finder pricing case, the useful evidence connects the submitted drug price, the accuracy certification, the beneficiary’s comparison and the later claim. We examine how those records fit together, including the drug and period being compared, the company responsible for the submission and what its people knew about the difference.

The certification matters because the government’s allegation paired inaccurate submissions with RxAmerica’s promise to supply accurate data. Someone who understands how the submission was prepared can make a discrepancy intelligible in a way the displayed number alone cannot.

The neighboring Part D rebate reporting cases concern a different report. In the Rite Aid and Elixir case, the government alleged that retained manufacturer rebates were labeled as service fees in reports affecting Medicare’s payment reconciliation. The shared issue is what the company told Medicare about its drug costs. RxAmerica’s alleged misstatement reached beneficiaries while they were choosing coverage.

Kmart’s Cash Prices and Insurance Reports

Kmart’s whistleblower complaint alleged another split between prices customers encountered and prices reported for reimbursement. It said the company sold generic prescriptions at lower cash-program prices while reporting higher usual-and-customary prices to insurers, including government drug programs. That reported field was supposed to describe the company’s ordinary price:

Kmart’s alleged substitution concerned the price on an insurance claim. RxAmerica’s concerned the price submitted for a beneficiary comparison tool. Both accounts show why the person who knows the underlying transaction can explain what a reported price conceals.

You Know How the Price Reached CMS

If you know why a plan’s submitted prices differed from its claims, speak with our whistleblower experts about how those prices reached Medicare. We work with you to build your strongest Part D whistleblower case around the prices, payments and decisions, bring in Medicare Part D whistleblower lawyers, and stay beside you throughout the case.