CVS Pharmacy, Inc., the retail pharmacy division of CVS Caremark Corporation got banged by the DOJ and ten state Attorneys General last week.  In a press release issued on April 15, 2011, the government announced that the Rhode Island-based company which operates more than 7,000 pharmacies in 41 states and the District of Columbia had agreed to pay the United States and ten of those states $17.5 million to resolve False Claims Act allegations arising out of Medicaid overbillings from 2008.  The qui tam relator who originated the claim that was picked up by federal and state officials will collect $2.6 million of the $17.5 million recovered under the settlement. That kind of money buys a lot of Dial.

According to scrippsnews, whistleblower Stephani LeFlore of St. Paul began working for the pharmacy giant as an overnight druggist in 2008.  The Twin Cities’ Pioneer Press relates that it was at a CVS store in St. Paul’s Payne-Phalen neighborhood that she heard allegations that a rival company had been overbilling Medicaid and wondered about the billing practices of her own employer.  Read on and draw your own conclusion as to how she became aware of those claims.

The Scripps article indicates that she alerted authorities to the alleged overbilling after noticing discrepancies in CVS’ customized pharmacy computer system.  The Press story says that after doing some digging, LeFlore filed her whistleblower lawsuit in 2008 that was joined by the U.S. Justice Department and ultimately settled last week.  Presumably she dug then filed, although the order of these activities is not critical.  Certain other facts, however, are more noteworthy.

The Twin Cities’ pharmacy industry was not unfamiliar with questionable billing issues at the time that Stephani LeFlore went to work for CVS.  As reported by Scripps, the company paid $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 in 2008.  That same year, two other national drugstore chains, including the rival Walgreen Company, settled similar drug-switching cases. One of LeFlore’s attorneys represented the qui tam relator – who happened to be another pharmacist – in the Walgreen case that netted a $9.9 million settlement.

It would not be hard to fathom attorneys recruiting a cadre of druggists to dig into the pharmacy records of all chains serving Minneapolis/St. Paul in order to look for billing discrepancies and other irregularities that might give rise to False Claims Act litigation.  It’s still a free country and a wrong – however discovered – is still a wrong.  But as to the pharmacist/relator, the more interesting inquiry is when and where the duty to the company ends and the duty to the public interest begins?

Large, publicly-traded companies all have serious compliance and ethics programs that require buy-in from the board room to the break room.  One expects CVS to be no different. Indeed, adherence to the company code of conduct is commonly a condition of continued employment, especially for professionals in such a company’s employ. This, too, is likely at CVS.

That being the case, then at what point does a pharmacist no longer have a duty to report overbillings to the hotline, and can elect instead to become a qui tamrelator? When is it permissible for an employee to quit working for and with its employer as agreed, and to work against it?  Could the presence of whistleblower more intent on gaining a qui tam settlement share than helping the company fix its deficiencies become the focal point of the response to a False Claims Act allegation?

What this suggests is an equitable defense premised upon the relator’s having unclean hands.  While probably not a winner, if even permitted, perhaps it might have some traction as a bargaining chip in settlement negotiations.  If a company has a healthy compliance and ethics program and is trying to  do the right thing, shouldn’t suffering divided loyalty and opportunism be worth something?

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Mahany & Ertl is a full service law firm representing victims of fraud and those with tax problems.  If you know of a business that is defrauding the government or taxpayers, call us. You may be entitled to a large financial reward. For more information, contact attorney Joe Bird in our Michigan office. Joe can be reached at (248) 909-4235 (direct) or by email at

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