Caremark Probe Goes Postal

Legal Strategy

Caremark is doing its best to derail the government's case altogether.

Originally, Caremark sought a declaratory judgment in Tennessee upholding the company's ability to reject Medicaid claims due to contract restrictions. That effort failed, but Caremark has since tried to use a single remark in the court's unfavorable decision to its advantage.

After ruling against Caremark and in favor of the government, the judge concluded that "the dispute between the parties is based on a good faith disagreement about a complex area of the law."

Caremark says that it previously believed that Medicaid had to abide by the same contract restrictions as other clients and even cited legal precedents supporting that stand. In turn, prosecutors have argued that Medicaid is entitled -- and even obligated under law -- to recover payments for drugs that should have been covered by third parties such as Caremark.

Caremark claims that it finally went to court in an effort to settle the issue once and for all. In a recent motion to dismiss the government's complaint, Caremark now suggests that it should not be punished under the False Claims Act -- which has resulted in massive penalties for others -- because of confusion about complicated legal matters.

"The government insists that Caremark's failure to accede to its legal position, even at a time when no court had ever supported the government's position, is somehow actionable under the False Claims Act," Caremark's motion states. "There is nothing remotely illegal or fraudulent about Caremark's adherence to the terms of its customers' plans and its reliance on established case law. The government's attempt to characterize Caremark's lawful conduct as a violation of the False Claims Act is entirely spurious and should be rejected by this court."