CVS Caremark came under scrutiny this week after a state audit revealed the company failed to properly audit prescription claims for New York’s Empire Plan—risking as much as $1.75 billion in overpayments.
A report from the Office of the New York State Comptroller found that CVS missed required on-site audits, skipped fraud checks, and reviewed too few claims from the state’s massive health insurance program.
CVS Caremark manages billions in pharmacy claims
CVS Caremark is the pharmacy benefit manager (PBM) for the Empire Plan, which covers over 1 million active and retired public employees through the New York State Health Insurance Program (NYSHIP). Between 2019 and 2023, CVS processed more than 156 million claims totaling $17.5 billion.
Under its contract with the Department of Civil Service, CVS is required to:
- Conduct on-site audits of the top 50 highest-paid pharmacies
- Monitor for fraud, waste, and abuse
- Notify Civil Service of suspicious activity
But the audit revealed gaps across all of these areas.
Key findings from the state audit
The Comptroller’s report outlined several failures in CVS’s auditing program:
Minimal audits at high-volume pharmacies
- CVS sometimes reviewed no Empire Plan claims during audits of top pharmacies.
- For example, at one pharmacy, CVS reviewed 207 claims—zero of them were tied to the Empire Plan.
- At another, CVS reviewed only 1 claim out of more than 1.2 million Empire Plan claims paid to that pharmacy.
Incomplete audit coverage
- CVS did not audit 5 of the top 50 highest-paid pharmacies, even though the contract required at least one audit of each during the contract period.
- Those 5 pharmacies received $183 million in Empire Plan payments.
No fraud or abuse referrals
- CVS did not refer any fraud or abuse cases to Civil Service during the audit period.
- Despite terminating 17 pharmacies for contract violations, CVS failed to categorize any discrepancies as fraud or abuse.
Unrecovered funds
- CVS identified $28.8 million in on-site audit discrepancies but did not remit $11.2 million of that to the state.
- Officials said this often happens when pharmacies go out of business or stop billing before disputes are resolved.
Possible losses: Up to $1.75 billion
The Comptroller’s office estimates that fraud, waste, and abuse may account for up to 10% of health spending. That means Empire Plan losses could have reached $1.75 billion during the five-year audit period. But CVS only recovered $63.1 million—just 0.36% of total claims.
Comptroller’s recommendations
To close the gaps, auditors issued five key recommendations:
- Expand the number of Empire Plan claims reviewed in audits
- Audit all top 50 pharmacies as required
- Clearly define fraud reporting duties
- Review and potentially repay the $11.2 million in unrecovered discrepancies
- Provide full details in audit reports, including total claims reviewed and discrepancy rates
CVS response
CVS Caremark officials pushed back on several findings, stating that fraud detection is the state’s responsibility and that some audit limitations are due to state law. However, Civil Service disagreed, noting the contract obligates CVS to flag and refer suspicious activity.
What happens next
CVS has 180 days to respond to the audit and outline how it will address the state’s findings. In the meantime, Civil Service is reviewing whether CVS’s failure to audit all top-paid pharmacies violates the contract.
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