DOJ, Omnicare, and CVS Reach Settlement Over Decade-Long False Claims Act Dispute

On July 1, 2026, long-term care pharmacy Omnicare, LLC disclosed that Omnicare and its parent company CVS Health Corporation (CVS) reached a proposed settlement agreement with the Department of Justice (DOJ) that, if approved by the bankruptcy court, would resolve an almost decade-long False Claims Act (FCA) action arising from allegations that Omnicare dispensed prescription drugs to residents of long-term care facilities without valid prescriptions (the “Omnicare Matter”). The proposed settlement was disclosed in a motion filed in the United States Bankruptcy Court for the Northern District of Texas, where Omnicare is currently proceeding under Chapter 11 following the United States District Court for the Southern District of New York’s entry of a $948,778,444.10 judgment in DOJ’s favor in the Omnicare Matter (the “Judgment”). A hearing on the motion seeking approval of the settlement is scheduled for August 12, 2026.

If approved, the settlement agreement requires Omnicare and CVS to pay the government at least $440 million, inclusive of an up-front payment of $130 million by CVS and a minimum of $310 million from Omnicare’s bankruptcy estate, with CVS guaranteeing any shortfall if DOJ has not received the full amount by an agreed deadline. The settlement agreement also provides the government with the right to recover any remaining proceeds from Omnicare’s bankruptcy estate, up to the amount of the Judgment plus post-judgment interest.

The settlement resolves one of the largest FCA judgments in recent years. It also closes litigation that produced significant rulings on FCA causation and parent-company liability, with implications for healthcare companies, corporate parents, and private equity sponsors.

FCA Action and Judgment

The Omnicare Matter commenced in June 2015, when a former Omnicare pharmacist filed a qui tam complaint on behalf of the United States, 29 states, and the District of Columbia alleging that Omnicare improperly sought reimbursement from federal healthcare programs for prescription drugs dispensed without valid prescriptions.¹ In December 2019, DOJ intervened in the litigation and expanded the case by naming CVS, which acquired Omnicare in 2015, as a defendant.² DOJ alleged that Omnicare pharmacies routinely dispensed prescription drugs to residents of long-term care facilities after prescriptions had expired, exhausted available refills, or otherwise become invalid and nevertheless submitted claims for reimbursement to Medicare, Medicaid, and TRICARE.³ DOJ also alleged that CVS caused the submission of false claims by failing to prevent the allegedly unlawful dispensing practices after acquiring Omnicare in 2015.⁴

Following years of motion practice and discovery, the case proceeded to a four-week jury trial in April 2025. On April 29, 2025, the jury returned a verdict in favor of the government, finding Omnicare liable under the FCA and awarding approximately $135.6 million in damages.⁵ The jury also found that CVS caused Omnicare to submit false claims, although it concluded that CVS’s conduct did not independently cause the government any monetary damages.⁶ After post-trial briefing, the United States District Court for the Southern District of New York entered a judgment totaling approximately $948.8 million, consisting of approximately $406.8 million in treble damages and $542 million in statutory penalties.⁷ The court further held CVS jointly and severally liable for approximately $164.8 million of the statutory penalties. DOJ touted the verdict as “one of the largest damages verdicts rendered by a jury in a False Claims Act case.”⁸

Omnicare and CVS appealed the judgment to the United States Court of Appeals for the Second Circuit in September 2025, challenging, among other things, the district court’s liability determinations and arguing that the damages and penalties awarded were statutorily and unconstitutionally excessive. The appeal was subsequently held in abeyance while the parties negotiated the proposed settlement, which, if approved by the bankruptcy court, will require dismissal of the appeals with prejudice.⁹

FCA Causation and Parent Company Liability

Aside from the parties’ settlement, one of the more significant developments in the Omnicare Matter for healthcare companies and their corporate owners was the district court’s discussion of FCA causation as applied to parent company liability. Before trial, CVS argued that it was entitled to judgment as a matter of law because there was insufficient evidence that it “caused” Omnicare to submit false claims to the government. CVS argued that it was merely a “holding company with no employees or business other than owning its subsidiaries,” and there was no evidence that it had itself taken relevant alleged actions or participated in any claims submissions.¹⁰ The district court permitted the issue to be decided by the jury, providing a detailed discussion of the circumstances under which a parent company may be held liable under the FCA for the conduct of its subsidiary.

The court explained that a parent company’s “mere awareness” that its subsidiary may have submitted false claims, coupled with a failure to intervene, is generally insufficient to establish FCA causation.¹¹ Likewise, the court explained that “run-of-the-mill ties that bind corporate parents and subsidiaries together,” such as “overlapping employees, managers, or officers,” financial benefit from the subsidiary’s operations, or general oversight of the subsidiary’s business, “are insufficient” to demonstrate that the parent caused false claims to be submitted.¹² At the opposite end of the spectrum, the court observed that evidence showing a parent company approved, directed, or orchestrated the underlying fraud would readily support FCA causation.¹³

The court concluded that FCA causation is not limited to those “two extremes.” Rather, it identified a “middle ground” in which a parent company may be responsible for exercising or may exercise sufficient influence or control over a subsidiary’s conduct to permit a jury to determine whether the parent caused the submission of false claims, even absent evidence that the parent expressly directed or approved the alleged fraud.¹⁴ In identifying the middle ground, the court surveyed various prior FCA decisions, including a decision denying a private equity firm’s motion for summary judgment on the issue of causation after finding that the firm, “by virtue of its members’ participation in” the board of an intermediate company, “had the power to fix the regulatory violations which caused the presentation of false claims but failed to do so.”¹⁵ The court ultimately determined that the evidence regarding CVS’s involvement in Omnicare’s operations fell sufficiently within that middle ground to allow the issue to proceed to trial, though it stated that this was a “close” call.¹⁶

Although the jury ultimately found that CVS caused Omnicare to submit false claims but did not independently cause the government to suffer monetary damages, the district court nevertheless held CVS jointly and severally liable for approximately $164.8 million in statutory penalties.¹⁷ Broadly, the court’s decision and causation analyses add to the developing body of case law that DOJ may rely upon in continuing to pursue FCA claims against parent companies, private equity sponsors, and other corporate owners whose involvement in a portfolio company’s operations extends beyond passive ownership and reinforce an enforcement trend that has become increasingly evident in recent years.

Key Takeaways

The proposed settlement brings to a close one of the most significant FCA cases in the healthcare industry in recent years, but the litigation offers several broader lessons for healthcare companies, pharmacies, corporate parents, private equity sponsors, and other investors.

• Substantial financial and operational risks of FCA investigations and litigation. The Omnicare Matter remained pending for more than a decade, beginning with the filing of a qui tam complaint in 2015 and culminating in a proposed settlement in 2026 after trial, post-trial proceedings, an appeal, and bankruptcy proceedings. The case underscores the importance of promptly investigating FCA allegations, assessing litigation risk, and evaluating opportunities for early resolution where appropriate.
• Government and court receptiveness to broad theories of FCA liability. The Omnicare Matter is demonstrative of the government’s appetite for seeking recovery for FCA violations from all potential sources, including parent companies, private equity sponsors, and other corporate owners, even where a qui tam relator does not name such entities in a complaint. Additionally, the district court’s judgment reflects courts’ continued willingness to impose substantial FCA damages and penalties in appropriate cases, including where such penalties could be paid by entities not directly involved in a false claim submission.
• Significance of corporate governance structures and oversight practices. Although ordinary parent–subsidiary relationships standing alone should not create FCA liability, the Omnicare Matter highlights the importance of clearly defining compliance responsibilities, documenting appropriate oversight, and ensuring that potential regulatory issues identified at the subsidiary level are promptly investigated and addressed. Companies with complex ownership structures, including private equity–backed healthcare organizations, should continue to assess whether their governance and compliance frameworks appropriately balance oversight responsibilities with minimizing unnecessary FCA risk.

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The Goodwin Healthcare team will continue to monitor important legal developments and their potential impact on healthcare providers, life sciences companies, pharmacies, and other industry participants. For more information on the issues discussed in this alert, please contact the authors, reach out to Goodwin’s False Claims Act group, or the Goodwin lawyer with whom you typically consult.

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