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CHSWC Releases California Janitor Workload Study Report

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California’s Commission on Health and Safety and Workers’ Compensation (CHSWC) released the “California Janitor Workload Study” report by the University of California (UC) San Francisco and UC Berkeley.

The report, requested by Assemblymember Miguel Santiago, presents an overview of the physical workload, psychosocial stress, and work climate factors contributing to a high prevalence of adverse health outcomes among a sample of California janitors collected between October 2021 and January 2023.

Among the findings are that the prevalence of adverse health outcomes was high, janitors reported high physical workloads across numerous tasks, differences in the prevalence of adverse health outcomes by sex and age were slight, and union status and job tenure were associated with differences in the prevalence of adverse health outcomes.

In addition, most janitor tasks evaluated using direct measurements and validated risk assessment tools indicated high ergonomic hazards and musculoskeletal disorders (MSD) risk. High job strain increased the prevalence of adverse health outcomes, particularly the prevalence of anxiety or depression, and industry-based time allocations often differed substantially from the actual time required to clean a space.

The report includes recommendations for California legislators, including consideration of a formal California regulatory standard, as well as facilitation of a collaborative approach to target intervention efforts that mitigate ergonomic hazards.

The full California Janitor Workload Study report, including an appendix section that responds to comments from the public and CHSWC commissioners, is posted online.

CHSWC, created by the workers’ compensation reform legislation of 1993, is charged with examining the health and safety and workers’ compensation systems in California and recommending administrative or legislative modifications to improve their operation. CHSWC was established to conduct a continuing examination of the workers’ compensation system and of the state’s activities to prevent industrial injuries and occupational diseases and to examine those programs in other states.

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AG Resolves Janitorial Misclassification Case for $2M

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The California Attorney General announced a nearly $2 million settlement with CleanNet USA, Inc. and its four California Area Operators resolving an investigation by the Attorney General’s Office, which found that some of CleanNet’s janitorial franchisees were misclassified as independent contractors under CleanNet’s franchising model in violation of state law.

CleanNet USA is a nationwide company that provides janitorial franchising and commercial cleaning services under the “CleanNet” brand name and grants franchising rights to its California Area Operators, who sell CleanNet unit franchises to individuals and entities in California and enter into franchise contracts with these unit franchisees.

After the payment of an initial franchise fee, CleanNet assigns cleaning services contracts to unit franchisees, who then provide cleaning services for CleanNet’s customers. As a result of CleanNet’s unlawful misclassification of certain individual franchisees who personally performed cleaning work, these workers were denied the protections of California’s employment laws, such as the right to minimum and overtime wages, regular meal and rest periods, reimbursement of business expenses, and accurate and itemized wage statements, and were further subjected to unlawful deductions from their wages.

Under the settlement, CleanNet will pay $1,700,000 in restitution and $150,000 in civil penalties and comply with injunctive terms requiring it to cease its misclassification of certain cleaners, notify all former and current workers of the settlement, and undergo monitoring for three years, among other terms.

Misclassification of workers occurs when an employer improperly classifies their employees as independent contractors so that they do not have to pay payroll taxes, minimum wage or overtime, or comply with other wage and hour law requirements such as providing meal periods and rest breaks. “Employees,” unlike “independent contractors,” are entitled to a wide range of rights, benefits, and protections under California law, including workers’ compensation coverage if injured on the job, the right to family leave, unemployment insurance, the legal right to organize or join a union, and protection against employer retaliation. As courts across the country have found, the use of a franchising business model does not shield companies who use these models to misclassify their workers from liability.

Under the settlement, CleanNet USA and its four California area operators, CleanNet of Southern California, Inc. (DBA CleanNet of Southern California), D&G Enterprises, Inc. (DBA CleanNet of the Bay Area), Paqnet, Inc. (DBA CleanNet of San Diego), and FCDK, Inc. (DBA CleanNet of Sacramento), (collectively, CleanNet) will change their franchising business model, pay civil penalties, and provide restitution to their cleaners for the losses the cleaners incurred due to their unlawful deductions, failure to reimburse cleaners for their supplies, and failure to pay at least the minimum wage for all hours worked. All current and former cleaners will be notified by CleanNet with next steps to claim restitution.

Additionally, CleanNet will preserve all documents and records necessary to demonstrate its compliance with the terms of the stipulated judgment and make those records available to the California Department of Justice for at least three years. CleanNet will also provide training to all current and future cleaners as part of a mandatory initial certification program to ensure that all cleaners understand their duties as employers when they hire other workers to perform cleaning work for CleanNet’s customers, and that they are aware of the liabilities and risks associated with misclassifying their own employees as independent contractors. The franchise will also remove a clause from its template customer service agreement that restrains employee mobility.

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Fresno Man to Serve 7.5 Years for Opioid Prescription Fraud

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Kelo White, 44, of Fresno, was sentenced to seven years and six months in prison for illegally distributing oxycodone and hydrocodone pills, Acting U.S. Attorney Kimberly A. Sanchez announced.

According to court records, from 2014 through 2018, White and Donald Ray Pierre, 56, of Fresno, obtained more than 450,000 oxycodone and hydrocodone pills based on fraudulent prescriptions that were filled by their co-conspirator, Ifeanyi Vincent Ntukogu, 49, of Fresno, who was a pharmacist in Madera. White was responsible for more than 250,000 of those pills. The fraudulent prescriptions were purportedly from more than 10 different doctors whose signatures had been forged.

White and Pierre had Ntukogu review each prescription before he filled it to make sure that government regulators would not deem it suspicious. For example, Ntukogu reviewed and rejected prescriptions that were supposedly written by certain doctors or that were written for individuals who were having prescriptions filled at other pharmacies because he believed those prescriptions may raise red flags. White and Pierre paid Ntukogu in cash, and then they sold the pills for a significant profit.

Ntukogu was sentenced on Nov. 25, 2024, to seven years and three months in prison. Pierre was sentenced on July 21, 2020, to nine years and four months in prison.

This case was the product of an investigation by the Federal Bureau of Investigation, the Drug Enforcement Administration, and the California Department of Health Care Services. Assistant U.S. Attorneys Antonio Pataca and Joseph Barton prosecuted the case.

The case was investigated under the DOJ’s Organized Crime Drug Enforcement Task Force (OCDETF). OCDETF identifies, disrupts, and dismantles the highest-level criminal organizations that threaten the United States using a prosecutor-led, intelligence-driven, multi-agency approach. For more information about OCDETF, please visit Justice.gov/OCDETF.

This case was also part of the DOJ’s Operation Synthetic Opioid Surge, which is a program designed to reduce the supply of deadly synthetic opioids in high impact areas as well as identifying wholesale distribution networks and international and domestic suppliers.

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Appeal of California Comp Carrier Rehabilitation Plan Denied

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California Insurance Company provided worker’s compensation insurance to businesses. Eighty-five percent of its business is in California. In 2011 it patented a “Reinsurance Participation Agreement” (RPA). The RPA was designed to allow an insurer to offer a retrospective rating policy to small and medium-sized companies. The RPA would accomplish this by having an employer take out a guaranteed cost policy, then the insurer would cede some of the insured risk to a reinsurer, such as a captive reinsurer, together with a portion of the premium. The reinsurer would then enter into a side agreement with the policyholder to cede some of that risk back to the policyholder. At the end of the policy period, the reinsurer would refund some of the premiums to the policyholder if the losses were lower than expected or charge the policyholder more if the losses were higher.

Under a program called EquityComp, CIC followed this template and issued guaranteed cost policies that had been submitted to the rating organization for the commissioner’s approval. CIC had its affiliate, Applied Underwriters Captive Reinsurance Assurance Company (AUCRA), reinsure some of the risk and issue the side agreements to the policyholders, which were not submitted for the commissioner’s approval.

Beginning in 2012, 68 EquityComp policyholders filed various claims or actions challenging the RPA. In a 2016 ruling in one of those challenges, the commissioner found that the RPA constituted a misapplication of CIC’s filed rates in violation of Insurance Code § 11737. (Matter of Shasta Linen Supply, Inc., Insurance Commissioner (June 22, 2016) No. AHB-WCA-14-31 (Shasta Linen).) The decision declared that CIC’s failure to file and secure approval of the RPA as required by section 11658 rendered it void as a matter of law. CIC petitioned for review of Shasta Linen in Los Angeles Superior Court, and in 2017 the parties settled their dispute. The parties agreed they had a good faith dispute about whether the RPA was void as a matter of law and the remedy authorized by the Insurance Code. A recital to the agreement stated that this dispute was “ultimately for the courts to decide.”

Litigation on the other RPA claims and actions policyholders had filed against CIC continued in California courts, federal courts, administrative proceedings before the commissioner, and in arbitration. CIC succeeded in defeating class certification motions. (E.g., National Convention Services, LLC v. Applied Underwriters Capital Risk Assurance Co. (S.D.N.Y. July 27, 2019, No. 15cv7063) 2019 WL 3409882, at *1; Shasta Linen Supply, Inc. v. Applied Underwriters, Inc. (E.D.Cal. Apr. 17, 2019, Nos. 2:16-cv-158-WBS AC, 2:16-cv-1211 WBS AC) 2019 WL 3244487, at *2.) One federal court granted CIC and its affiliates summary judgment on claims that the RPA violated the Unfair Competition Law because it was void. (Pet Food Express, Ltd. v. AUI (E.D.Cal. Sept. 12, 2019, No. 2:16-cv-01211 WBS AC) 2019 WL 4318584, at *2, *4.)

As of January 2019, Berkshire Hathaway, Inc. (Berkshire Hathaway) indirectly owned 81 percent of CIC and its affiliates. Berkshire Hathaway agreed that month to sell its shares to Steven Menzies, CIC’s president and chief operating officer, who already owned 11.5 percent of the company. The agreement allowed Berkshire Hathaway to retain a $50 million breakup fee if the transaction did not close by September 30, 2019.

In April 2019 Menzies submitted an application to the department for approval of the transaction. After the commissioner found Menzies’ first two applications insufficient Menzies submitted a third on September 7, 2019. The department informed CIC that it could neither approve nor disapprove CIC’s application by September 30. Berkshire Hathaway required $10 million for an extension of the transaction deadline until October 10, 2019.

Menzies then proposed and the New Mexico Office of the Superintendent of Insurance agreed to hold an expedited approval process to re-domesticate CIC in New Mexico by merging CIC into a newly formed New Mexico corporation, CIC II. The New Mexico superintendent approved the merger, conditioned on the stock transactions between Menzies and Berkshire Hathaway closing by October 10, 2019.

CIC II satisfied the New Mexico superintendent’s conditions for approval, so the merger of CIC with CIC II would be completed by filing a certificate of merger with the California Secretary of State. (Corp. Code, § 1108, subd. (d).) On October 22, 2019, the department asked CIC by telephone not to file the certificate of merger with the California Secretary of State so that the parties could meet and resolve their issues. CIC agreed, but the parties never met.

On November 4, 2019, without notice to CIC, the commissioner filed an ex parte application to be appointed conservator of CIC. In January 2020, CIC unsuccessfully moved to vacate the conservatorship. CIC II and an affiliate of CIC filed federal actions seeking to vacate the conservatorship and enjoin it. (Applied Underwriters, Inc. v. Lara (E.D.Cal. 2021) 530 F.Supp.3d 914; California Ins. Co. v. Lara (E.D.Cal. 2021) 547 F.Supp.3d 908.) The district courts dismissed both suits, and the Ninth Circuit Court of Appeals affirmed. (Applied Underwriters, Inc. v. Lara (9th Cir. 2022) 37 F.4th 579, 600.)

In October 2020, the commissioner filed an application for approval of a rehabilitation plan, which would end the conservatorship. CIC opposed the settlement provision in section 2.6 of the plan. The trial court approved the plan in April 2024. CIC appealed and also filed a petition for writ of mandate challenging the approval of the plan. This court summarily denied the petition in a one-paragraph order, noting that CIC had failed to demonstrate that its remedy on appeal was inadequate. (Cal. Ins. Co. v. Superior Court (June 20, 2024, A170573).)

With regard to the CIC appeal, the Court of Appeal found no merit in any of CIC’s arguments and affirmed the trial court’s order in the published case of Insurance Commissioner of the State of California v. California Insurance Company et al. – A170622 (July 2025)

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DA Investigates Toxic Hazards at Carson Medical Products Facility

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Back in August 2022 Cal/OSHA opened an investigation, and later issued 18 citations, including six citations for willful-serious violations, to Parter Medical Products, Inc. in Carson California for failing to protect its employees from overexposure to ethylene oxide (EtO), a toxic chemical. The proposed penalties totaled $838,800. It’s inspection showed “this was not an isolated incident of chemical overexposure to workers. Parter Medical Products, Inc. dba Parter Sterilization Services was founded in 1984, and uses ethylene oxide gas to sterilize medical devices.

The Carson City Council unanimously voted in early 2022 to request air monitors be placed in various locations of the city to monitor air quality. South Coast AQMD was further investigating EtO emissions in the nearby residential communities and the agency was working with the City of Carson to identify additional locations to collect 24-hour samples in the nearest community and school. So far, data from residential monitors show EtO levels to be within typical background levels.

On March 14, 2024 the U.S. Environmental Protection Agency announced a rule that will reduce lifetime cancer risks for people living near commercial sterilization facilities across the country. The final amendments to the air toxics standards for ethylene oxide commercial sterilization facilities put in place the strongest measures in U.S. history to reduce emissions of EtO, one of the most potent cancer-causing chemicals. Through the installation of proven and achievable air pollution controls, commercial sterilizers will reduce emissions by more than 90%.

However, it appears that now in 2025, Parter continues to be under close scrutiny since the Los Angeles County District Attorney Nathan J. Hochman announced this week that members of his Bureau of Investigation executed a search warrant as part of an ongoing criminal investigation into allegations that Parter Medical Products, Inc., doing business as Parter Sterilization Services, failed to protect its employees from prolonged exposure to ethylene oxide, a known toxic chemical.

“No employer should risk the safety of their workers by exposing them to toxic substances and then turn a blind eye,” District Attorney Hochman said. “Ethylene oxide can silently poison people over time — causing cancer, damaging organs, and cutting lives short. We remain steadfast in our commitment to follow the evidence wherever it leads and will not hesitate to hold accountable any individual or organization that puts profits over public health.”

More than 20 members of the District Attorney’s Bureau of Investigation, in coordination with the Los Angeles County Fire Department and the California Department of Toxic Substances Control, executed the search warrant on July 17 at Parter Medical Products Inc., in the city of Carson.

Ethylene oxide is a hazardous gas linked to cancer, reproductive harm, and neurological damage. It is colorless and its odor is undetectable to the human nose until it reaches harmful concentrations. Despite being aware that some employees were exposed to elevated levels of the chemical, the company is accused of failing to take adequate steps to mitigate the danger.

The matter is being investigated by Assistant Head Deputy Daniel Wright of Environmental Crimes and the District Attorney’s Bureau of Investigation. Anyone with information related to this matter may call AHD Wright at (213) 257-3001.

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July 14, 2025 – News Podcast

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Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: WCAB Denies Reconsideration of Psyche Claim Take Nothing. Convicted SoCal Comp Fraudster Charged in New $270M Fraud Sweep. DME Supplier Paid $227K in Kickbacks in $5.9M Fraud Case. Five No.Cal. Defendants Charged in Health Care Fraud Sweep. SoCal Healthcare Clinic Operator Sentenced for $20M Fraud. Proposed Bipartisan Law Limits Small Business Predatory ADA Claims. CWCI Finds Independent Medical Reviews Are Trending Up. Physicians Owned Malpractice Insurer Buys NYSE Listed Comp Carrier.

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DOL to Rewrite or Repeal More Than 60 “Obsolete” Rules

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Multiple news outlets, including PBS, The Washington Post, and The Associated Press, reported that the U.S. Department Of Labor is aiming to rewrite or repeal over 60 workplace regulations. These reports cite a statement from Secretary of Labor Lori Chavez-DeRemer, describing the initiative as the “most ambitious proposal to slash red tape of any department across the federal government.”

The proposed changes cover regulations like minimum wage requirements for home health care workers, standards for exposure to harmful substances, and safety procedures in industries such as construction and mining. The goal, according to the DOL, is to reduce costly and burdensome rules to align with President Donald Trump’s deregulation agenda.

While the exact list of all 60+ changes is not fully detailed in available sources, several significant proposals have been highlighted across reports for their potential impact on workers and industries. The following are notable among the proposed changes.

– – Reversal of Minimum Wage and Overtime Protections for Home Health Care Workers: The proposal would reverse 2013 regulations under President Barack Obama, reverting to a 1975 framework. This could allow an estimated 3.7 million home health care workers to be paid below the federal minimum wage ($7.25/hour) and lose eligibility for overtime pay in states without equivalent protections.

– – Elimination of Retaliation Protections for Migrant Farmworkers: The DOL proposes to reverse a 2024 rule protecting H-2A migrant farmworkers from retaliation for actions like filing complaints or participating in investigations. It also includes rescinding a requirement for seat belts in employer-provided transportation for agricultural workers.

– – Removal of OSHA’s Construction Site Lighting Requirement: The Occupational Safety and Health Administration (OSHA) plans to rescind a rule mandating adequate lighting at construction sites, arguing it doesn’t significantly reduce risks. OSHA would rely on its “general duty clause” to address lighting deficiencies.

– – Limiting OSHA’s Authority in High-Risk Entertainment and Sports:OSHA proposes to limit its “general duty clause” from penalizing employers for injuries or deaths in “inherently risky” activities like movie stunts, animal training, or sports (e.g., NFL punt returns, NASCAR racing). The DOL argues Congress didn’t intend OSHA to regulate such activities.

– – Reduction of Mine Safety and Health Administration (MSHA) Oversight: The proposal would strip MSHA district managers of authority to mandate improvements to mine ventilation or roof collapse prevention plans, arguing this oversteps Congressional intent by allowing unelected officials to create rules without public comment.

– – Repeal of Affirmative Action Requirements for Apprenticeships: The DOL plans to eliminate affirmative action requirements for apprenticeship programs, which aimed to increase diversity and inclusion in training opportunities.

These changes stand out due to their broad reach across industries (healthcare, agriculture, construction, mining, entertainment), their potential to affect millions of workers (e.g., 3.7 million in home care), and their implications for safety, wages, and worker protections. Critics, including labor unions and advocacy groups, argue they disproportionately harm vulnerable populations like women, minorities, and migrant workers, citing increased risks of injury, death, or exploitation. Supporters, including conservative groups and industry leaders, argue they reduce compliance costs and foster economic growth.

The 60+ proposals require public comment periods and further stages before implementation, meaning they’re not yet written, published and finalized.

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New California Court Rule and Standard Adopted for Use of AI

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The California Judicial Council Artificial Intelligence Task Force is a body established by California Supreme Court Chief Justice Patricia Guerrero in May 2024 to evaluate and develop policy recommendations for the use of generative artificial intelligence (AI) in the state’s judicial branch. Its primary goal is to balance the potential benefits of AI in court operations with safeguards to protect public trust, confidentiality, privacy, and judicial integrity.

Chaired by Administrative Presiding Justice Brad R. Hill of the Fifth Appellate District, the task force includes judicial officers like Justice Mary J. Greenwood, Judge Arturo Castro, Justice Stacy E. Boulware Eurie, Judge Kyle S. Brodie, and others, along with court executive David Yamasaki and policy advisor Jessica Devencenzi.

On July 18, 2025, the Judicial Council adopted Rule 10.430 and Standard 10.80, effective September 1, 2025. These require courts allowing AI use to develop policies by December 15, 2025, ensuring accountability, transparency, and bias prevention. Courts can either adopt the model policy or create their own, addressing confidentiality, privacy, and accuracy verification.

This rule applies to generative AI tools used for court operations, such as drafting internal documents, research, or administrative tasks (non-adjudicative purposes). Rule 10.430 aims to promote responsible and ethical use of generative AI in court operations while addressing risks like data breaches, biased outputs, and inaccuracies. It responds to the growing integration of AI in judicial systems while prioritizing public trust and fairness.

It does not govern AI use by attorneys, parties, or the public submitting materials to the court, though courts may set related local rules.

AI-generated content must be reviewed by humans to ensure accuracy and prevent reliance on “hallucinations” (inaccurate or fabricated outputs). AI use must align with judicial ethics, ensuring it does not compromise impartiality, due process, or public trust in the judiciary. Judges are restricted from using AI for adjudicative tasks (e.g., drafting rulings) unless explicitly allowed by the court’s policy with safeguards.

Standard 10.80 of the California Rules of Court, also adopted by the California Judicial Council on July 18, 2025, and effective September 1, 2025, provides guidance to support Rule 10.430 in governing the use of generative artificial intelligence (AI) in California’s judicial branch, including superior courts, Courts of Appeal, and the Supreme Court. While Rule 10.430 sets mandatory requirements for courts to develop AI policies, Standard 10.80 offers advisory guidelines to help courts implement those policies effectively.

California’s court system, the largest in the U.S. with 65 courts, 1,800 judges, and five million cases annually, is the first to adopt such comprehensive AI rules, setting a national standard. Other states like Illinois, Delaware, and Arizona have similar policies, while New York, Georgia, and Connecticut are exploring them.

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Uber Alleges L.A. Doctors & Lawyers Filed Fraudulent Claims

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Uber Technologies filed a lawsuit yesterday in the United States District Court for the Central District of California alleging a fraudulent scheme involving personal injury claims filed against them in California.

The complaint alleges that this “scheme begins when Defendants (Igor) Fradkin, Downtown LA Law Group, Emrani, and Law Offices of Jacob Emrani identify individuals with potential personal injury claims against rideshare companies such as Uber.” And goes on to allege “Both firms aggressively pursue clients to sue Uber, as shown in this online advertisement by Emrani” which appears to be screen grab of an advertisement showing Jacob Emrani next to an UBER/Lyft logo above the words “Uber or Lyft Accident?” followed by a banner that reads “Call Jacob.com.”

Uber then alleges that a “key repeat participant in this fraud is Defendant Greg Khounganian, a spinal surgeon who owns and controls GSK Spine, an orthopedics practice. Working with personal injury coordinators at Defendant Radiance Surgery Center, a surgery center which specializes in treating patients with pending personal injury lawsuits and which also does business as Sherman Oaks Surgery Center, Khounganian accepts referrals from lawyers who have cases against Uber with the understanding that he will perform specific acts to increase the value of their lawsuits and/or claims.”

Uber futher alleges “Both he and Radiance Surgery Center conceal their secret side agreements with the referring lawyers to discount such liens. To increase his desirability as a referral source for the lawyers, Khounganian produces fraudulent records of medical necessity and/or causation that he transmits to the lawyers for the purposes of artificially inflating claimed amounts. These lawyers include Defendants Igor Fradkin and his law firm, Downtown LA Law Group, as well as Jacob Emrani and his law firm, Law Offices of Jacob Emrani.”

Allegedly “Many of Fradkin’s and Emrani’s clients actually have health insurance. But to maximize their eventual recovery in their fraudulent lawsuits, Fradkin and Emrani steer these claimants away from medical providers who would bill their health insurance. Instead, these claimants are directed to specified medical providers, selected by the attorneys, who bill on a lien basis pursuant to a kickback scheme, in which certain medical providers agree to surrender their lien rights in exchange for a steady supply of claimants from the lawyers. “

And “These medical providers then generate bills for their services at above- market, artificially inflated rates that they send to Fradkin, Emrani, and their respective law firms for insurance claims and for use in the litigation against Uber and other targets of the scheme.”

Uber seeks restitution of funds obtained through the scheme, treble damages, costs, and attorneys’ fees under RICO (18 U.S.C. § 1964(c)), equitable relief, including injunctions, disgorgement, and appointment of a monitor or receiver to prevent further violations, punitive damages and prejudgment interest. The lawsuit was filed on July 21st by Perkins Coie LLP.

Uber Technologies, Inc. has filed three racketeering lawsuits in 2025 against lawyers and medical providers for alleged fraudulent insurance claims, with this lawsuit against Downtown LA Law Group et al.being the third.

The the first was filed in New York in 2025 targeting a group of lawyers and medical providers in New York for allegedly exploiting Uber’s state-mandated $1 million rideshare insurance policy to file fraudulent personal injury claims. The scheme allegedly involved directing claimants to pre-selected medical providers who produced fraudulent medical records and bills to inflate settlement demands.

The second was filed in South Florida (Uber v. Law Group of South Florida et al., Case No. 25-cv-22635-CMA) and Uber accused the defendants of staging car accidents, manufacturing damages, and pursuing unnecessary medical procedures to exploit insurance policies between 2023 and 2024.

All three lawsuits allege a similar pattern where personal injury lawyers and medical providers collude to inflate claims by directing claimants to providers who perform unnecessary treatments or produce fraudulent medical records. These claims target Uber’s mandatory $1 million liability insurance, leading to inflated settlements or lawsuits.

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Aetna Whistleblower Wins $95M FCA Claim Against Major PBM

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The case of United States ex rel. Behnke v. CVS Caremark Corp., No. 14-cv-824 (E.D. Pa.), is a qui tam lawsuit filed in 2014 under the False Claims Act (FCA) in the U.S. District Court for the Eastern District of Pennsylvania. The case was initiated by whistleblower Sarah Behnke, a former head actuary for Medicare Part D at Aetna, against CVS Caremark Corporation, a major pharmacy benefit manager (PBM).

This case concerns the complex interplay between the Centers for Medicare and Medicaid Services (“CMS”), health insurers, pharmacy benefits managers (“PBMs”), and pharmacies. It involves health insurers Aetna and SilverScript, PBM Caremark, and pharmacies Walgreens, Rite Aid, and CVS Pharmacy.

Sarah Behnke, initiated this whistleblower case against CVS Caremark Corp. (including its pharmacy benefit manager subsidiary, CVS Caremark) for causing two Medicare Part D Plan Sponsors, Aetna and SilverScript, to report false and inflated drug prices for purchases made at three national chain pharmacies (Walgreens, Rite Aid, and CVS pharmacies), causing the federal government to overpay for these generic drugs.

Caremark argued that Medicare was aware that the actual costs of drugs dispensed to Medicare Part D beneficiaries were lower than the reported costs, but did nothing about it, and continued to pay claims based on the reporting. Therefore, Caremark argued, its alleged misconduct was not material to Medicare’s decision to continue to pay subsidies.

In its summary judgment decision on April 2, 2024, the United States District Court for the Eastern District of Pennsylvania granted partial summary judgment in favor of the whistleblower, ruling as a matter of law that some of the reported prices were false (leaving to the jury to decide whether additional reported prices also were false). The Court also rejected the CVS Health defendants’ attempt to have the claims dismissed without trial.

Three individuals intimately involved in Aetna’s internal investigation of Caremark’s pricing scheme testified at trial: Jean Walker, Sarah Behnke, and Charles Klippel along with other plaintiff and defense witnesses. After an eight-day non-jury trial in March 2025, Chief Judge Mitchell S. Goldberg of the U.S. District Court for the Eastern District of Pennsylvania issued a comprehensive 105 page Memorandum Opinion on June 25, 2025 indicating that CVS Caremark Corporation would be required to pay the U.S. government $95 million in actual damages.

The court found that CVS Caremark knowingly managed drug prices to maximize profits, leading to Medicare overpaying for prescription drugs. Although the court ruled in favor of CVS Caremark on some claims, it held them liable for the overcharges. Judge Goldberg will decide after further briefing whether to triple the damages to $285 million under the False Claims Act. Additionally, the court has not yet determined how many individual false claims were submitted, With mandatory civil penalties under the FCA, this could also increase the final judgment amount.

According to a review of this case by Duane Morris LLP, the ruling is notable since PBMs have rarely been named defendants in FCA cases. In controlling the flow of medications between drug manufacturers, health insurance companies and pharmacies, and ultimately to pharmacy customers, PBMs obviously yield a substantial amount of power within the drug-pricing space.

Medicare relies on PBMs providing accurate information and reporting in order to keep drug costs within reasonable ranges. This case demonstrates the consequences when these entities, which are historically meant to lower drug prices, actually illegally inflate them. It also speaks to the ability of the FCA to serve as a remedy when that trust is breached.

Third, this ruling sheds more light on the all-too-opaque process of drug pricing. In recent years, the federal government has taken action in an attempt to halt these pricing practices. Beginning in 2024, CMS banned direct and indirect renumeration fees, which previously allowed PBMs to claw back reimbursements remitted to pharmacies based on undisclosed metrics.

Just recently, attorneys from the U.S. Department of Health and Human Services and the U.S. Department of Justice announced the formation of a working group focused on enforcing the FCA. Priority areas for enforcement include Medicare Advantage and drug pricing, two areas in which PBMs and pharmacies are directly involved.

Two of the pharmacies allegedly involved in Caremark’s scheme include Rite-Aid and Walgreens. Rite-Aid recently filed for bankruptcy, and Walgreens is closing over 1,000 stores nationwide in response to financial difficulties.

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