An audit by the New York State Comptroller’s Office has revealed that CVS Caremark failed to collect and remit more than $1.1 million in drug rebates owed to the state’s employee health insurance program, raising questions about oversight and transparency in one of the state’s largest public benefit contracts.
The report, released in March, examined whether CVS Caremark fulfilled its contractual obligation to negotiate, collect, and pass on all eligible drug rebates to the Department of Civil Service under the New York State Health Insurance Program (NYSHIP). The findings cover the period from January 2019 to December 2022, during which the state’s Empire Plan processed more than 126 million prescription claims totaling over $13.1 billion.
Auditors found that CVS Caremark failed to invoice manufacturers or collect rebates in numerous instances, despite the claims being eligible under the program. A judgmental review of the top 10 drug manufacturers and 25 high-value drugs identified $1,160,286 in rebates that were not properly remitted to the Civil Service Department.
“CVS Caremark officials were unable to adequately support why these rebates were not collected and remitted,” the report states. Auditors concluded the money is owed to the state and called on the company to remit the full amount.
In one example, CVS Caremark claimed $75,101 in rebates were ineligible due to pharmacies allegedly qualifying for reduced pricing. However, auditors determined that none of the dispensing pharmacies met those criteria at the time of service—meaning the rebates should have been invoiced and paid.
Under its contract, CVS Caremark is required to return 100% of rebate revenue—ranging from base and market share rebates to discounts and administrative fees—attributable to the Empire Plan. Civil Service received more than $2 billion in commercial rebates during the audit period, but the report makes clear that not all eligible funds were recovered.
The Comptroller’s Office recommends two actions: first, CVS Caremark should review and pay the $1.16 million identified; and second, the company must strengthen controls to ensure all eligible rebate revenue is properly invoiced, collected, and passed on to the state in a timely manner.
The Comptroller requested that CVS Caremark report back within 180 days on what corrective actions it has taken in response to the audit’s findings.
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