CVS Settlement featured in Minnesota Lawyer

Our recent False Claims settlement with CVS was covered by Minnesota Lawyer. It is reprinted here with permission:

Medicaid fraud case nets $2.6M award

Friday April 29, 2011
By Barbara L. Jones

A team of lawyers including James G. VanderLinden, seated, and Robert P. Christensen, Brian Wojtalewicz and Neil P. Thompson took on Big Pharma and won. (Staff photo: Bill Klotz)

Once again, a team of Minnesota lawyers has taken on Big Pharma and won.

Neil P. Thompson, Robert P. Christensen, Brian Wojtalewicz and James G. VanderLinden recently settled a qui tam case against the pharmacy chain CVS for $17.5 million.  The whistleblower/relator, pharmacist Stephani LeFlore of Minnesota, alleged that CVS designed a billing software program that consistently overcharged Medicaid for prescription drugs.

LeFlore and her attorneys will receive $2,595,460 under the state and federal False Claims Acts, and are also entitled to receive attorney fees from CVS.  The reward is 16 percent of the settlement, a little bit more than the national average of 15.6 percent.  The amount of the attorney fee is still under negotiation.

The four lawyers also sued Walgreens in 2005 for using a billing system that cheated Medicaid. That case settled in 2008 for $9.9 million with the whistleblowers – Thompson, who is a pharmacist as well as a lawyer, and another man – receiving $1.44 million plus fees.

In the CVS case, the fraud arose in connection with customers who were on Medicaid and also had private health insurance coverage.  In the 10 states involved in the lawsuit – California, Massachusetts, Michigan, Minnesota, Florida, Indiana, Alabama, Nevada, New Hampshire and Rhode Island – CVS was supposed to charge the insurance companies a certain amount for prescriptions, with a limited co-pay charged to the customers. This limited co-pay was assigned to Medicaid.

But LeFlore, who is a pharmacist at CVS, alleged that CVS consistently overcharged Medicaid for the co-pays. She claimed that overcharges occurred on hundreds of thousands of prescription sales for over five years. To support her claims, she first gathered data from CVS’s computers, Christensen said.

LeFlore was told by her attorneys to look to see how much CVS had billed Medicaid, and then contact the state and the insurance companies to see how much CVS was entitled to.

Because the same attorneys had handled the Walgreens case, it was easier to know what to look for, Thompson said.

“She … had a tip as to what to look for, because of the previous cases,” he noted.

Once LeFlore had collected the information, she and her attorneys could run the numbers and see a pattern, Wojtalewicz said.

Before filing their case, LeFlore’s attorneys wanted to make sure they were bringing good information to the table.

“We wanted to have some of the juice before we got to the government to build up our credibility, to prove our case,” Christensen said. “Not only do we have to sell it to ourselves, we have to sell it to the government lawyers and then it has to get sold to the defendant.”

Typically, a relator files a complaint under seal. This allows the government, if it decides to intervene, to investigate though its own channels before informing the object of the investigation.  If the investigation reveals a basis for going forward, a judge partially lifts the seal and advises the defendant of the case. Then the parties may negotiate a settlement, keeping in mind that the law allows for treble damages and a penalty of $5,500 to $11,000 for each claim falsely filed, VanderLinden said.

As the case develops, the relator’s attorneys may find themselves in conflict with the government over their share.

“We often end up negotiating with the government,” Wojtalewicz said.

He said that many private lawyers who work with qui tam cases become frustrated because the federal attorneys are “smothered” in False Claim Act matters.  “We think they cherry-pick.  They take the biggest and most easily proven, and you can’t blame them.”

In this case, the government almost backed away because they didn’t think there were enough damages to make it worth pursing. But LeFlore’s lawyers persisted and the government eventually came around.

Qui tam cases are frustrating for the relator, noted Thompson, because he or she is generally still employed by the defendant.

“One of the important take-aways for lawyers … is to emphasize that the whistleblower should get advice early before he or she reports inside the company,” Wojtalewicz said.  Otherwise, “you’re painting a big target on your back.”

Venue is an important issue in qui tam cases. In the LeFlore case, one of the first strategic decisions the team made was to sue in federal court in Wisconsin, which is in the Seventh Circuit. “Eighth Circuit opinions on false claims really are oriented to the corporations, not the whistleblower,” Wojtalewicz explained.

Stephani LeFlore, as Relator for the United States v. CVS Pharmacy, Inc.

CVS pays $17.5 Million to settle Medicaid Fraud

CVS, the giant retail pharmacy chain, has agreed to pay $17.5 Million to settle a whistleblower lawsuit accusing it of Medicaid fraud (“welfare fraud”).

THE FRAUD

According to her False Claims Acts lawsuit, CVS pharmacist Stephani LeFlore of Minnesota brought evidence to the government that CVS used a billing system for years that was designed to overbill Medicaid on prescription charges. Ms. LeFlore is represented by Minnesota attorneys Neil Thompson, Brian Wojtalewicz, Robert Christensen, and James VanderLinden, with local counsel Aaron Halstead of Madison, Wisconsin, where the case was filed in federal court.

It was done in relation to dual-eligible customers – those legitimately on Medicaid who also maintained their private health insurance coverage. The insurance coverages required CVS to charge the insurance company a smaller amount for prescriptions, and limited co-pay from the customer. When a person is allowed Medicaid coverage, the government always obtains an assignment of the person’s rights under their private health insurance coverage. The government essentially takes over the citizen’s rights under the coverage. This includes the common right to pay a smaller co-pay amount on prescriptions.

Ms. LeFlore claimed in her federal and state lawsuits that CVS should only have billed the Medicaid program the same limited co-pay on prescriptions that it would have normally billed the customer under the insurance plan. She alleged that CVS designed a billing software program for its pharmacies that consistently overcharged Medicaid on these co-pays. She claimed that these overcharges occurred on hundreds of thousands of prescription sales for well over five years.

The $17.5 Million settlement covers over-billings by CVS in the states of Minnesota, California, Massachusetts, Michigan, Florida, Indiana, Alabama, Nevada, New Hampshire and Rhode Island.

Ms. LeFlore first complained internally, but she was told by a supervisor that “corporate took care of the billing” and that she need not be concerned. She then retained her attorneys and commenced the False Claims Acts (qui tam) lawsuit in September, 2008. The lawsuit stayed under seal (non-public), according to the False Claims Acts and court orders, until the announcement of this settlement.

Ms. LeFlore and her attorneys will receive $2,595,460.00 as the reward under the federal and state False Claims Acts. They are also entitled to receive attorney fees from CVS.

[Read more]

Stephani LeFlore in the Star Tribune

Below is an article from the Star Tribune about our client, Stephani LeFlore.

St. Paul whistleblower gets $2.6M in CVS case
The company routinely overbilled the government for copays in 10 states, including Minnesota. CVS has agreed to pay $17.5 million.

A CVS pharmacist in St. Paul who blew the whistle on the drugstore chain for overbilling on Medicaid prescriptions will get $2.6 million in a settlement.

The retail pharmacy division of CVS Caremark Corp. agreed last week to pay $17.5 million to settle allegations that it routinely overbilled the government’s Medicaid prescription programs in 10 states, including Minnesota. CVS was allegedly inflating claims for the prescription co-pays that Medicaid picks up for those patients who are primarily covered by private health insurance.

Whistleblower Stephani LeFlore, who started as an overnight pharmacist in 2008, alerted authorities to the alleged overbilling after noticing billing discrepancies in CVS’ customized pharmacy computer system. She called the private health insurers covering the prescriptions to determine the actual copay Medicaid patients were supposed to pay. In one example, CVS submitted a claim for $26.75 for a co-pay that was supposed to be $25.

The company, based in Woonsocket, R.I., said in a statement that it didn’t intentionally overcharge any state Medicaid program. It also noted that the group of patients at issue, who qualify for both Medicaid and third-party insurance, make up a small percentage of the overall Medicaid population.

The case was filed in 2008 under the federal False Claims Act and sealed. It was unsealed Friday when the settlement was reached.

Court documents describe LeFlore as an experienced pharmacy manager, a graduate of the University of Minnesota’s pharmacy college who worked as an overnight pharmacist for CVS in St. Paul. She could not be reached for comment.

One of her four lawyers, Bob Christensen in Minneapolis, called the $17.5 million “a significant amount of money recovered for the taxpayers.”

“This person took a risk to bring this to the attention of the government,” he said.

CVS will pay the federal government $7.9 million plus interest, and the states $9.5 million plus interest. The states include Alabama, California, Florida, Indiana, Massachusetts, Michigan, Minnesota, New Hampshire, Nevada and Rhode Island.

The U.S. Department of Justice announced the settlement Friday, saying it is emphasizing combating health care financial fraud.

“Medicaid covers the poorest, most vulnerable people in American society. Overcharging this needed government program for prescriptions is a disservice to everyone and won’t be tolerated,” said Daniel Levinson, inspector general of the U.S. Department of Health & Human Services, in the statement.

In 2008, CVS agreed to pay $36.7 million to settle charges that it overbilled Medicaid by substituting more expensive capsules of a popular generic antacid instead of the prescribed tablets.

At least two other national drugstore chains, including CVS rival Walgreen Co., settled similar drug-switching cases that year.

Jennifer Bjorhus • 612-673-4683