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Dec 2 (Reuters) - CVS Caremark Corp has agreed to pay $4.25 million to settle allegations it failed to reimburse Medicaid for patients' drug costs that should have been paid by private health plans administered under the company's pharmacy benefit management unit, the U.S. Justice Department said on Monday.
When a patient is covered by both the federal government's Medicaid program for the poor and a private health plan, the private insurer by law must assume the costs of healthcare.
CVS, which operates the No. 2 drugstore chain in addition to the Caremark PBM business, allegedly used a computer claims processing platform to cancel claims for reimbursement submitted by Medicaid for "dual eligible" individuals, according to the government.
CVS denied engaging in any wrongful conduct. In a statement, the company said it settled the matter to avoid the expense and uncertainty of lengthy litigation.
Under the agreement, the government will receive about $2.31 million and five states -- Arkansas, California, Delaware, Louisiana and Massachusetts -- will share $1.94 million.
The case was brought to the Justice Department by a whistleblower, Janaki Ramadoss, a former Caremark quality assurance representative. Ramadoss will receive $505,680 from the federal government's share of the settlement and additional amounts from the settling states, the Justice Department said in a statement.