Philadelphia, the gritty, spirited city where fraud is reported and where its whistleblowers go the distance

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By Jeff Newman, Esq., MBA, with AI help

The writer and novelist Pete Dexter was a columnist for the Philadelphia Daily News from the mid-1970s to the mid-1980s. Read his columns, collected in Paper Trails, and you find Philadelphia’s spirit defined through everyday community and personal bonds rather than grand spectacles. He captured a blue-collar toughness rooted in a relentless work ethic and an unbreakable sense of community. It belonged to the dockworkers, manufacturing laborers and rail workers who made the city the “workshop of the world,” and a city with heart.

The city’s link to a different kind of courage reaches further back, to July 1778.

That year, the Continental Congress resolved that everyone in the service of the United States had a duty to report misconduct by those in authority to Congress or other proper officials. It also provided for the legal expenses that coming forward could bring. The resolution grew out of a petition by ten officers and men aboard the warship Warren against their commander, Commodore Esek Hopkins.

The courage in 1778 was not Philadelphia’s. The petitioners signed their complaint aboard the Warren in the Providence River, in Rhode Island. But the vote that protected them was taken here. Congress had fled to York, Pennsylvania, during the British occupation, adjourned there on June 27, 1778, and resumed business in Philadelphia in early July, according to the State Department’s Office of the Historian.

By a twist of fate, the vote now commemorated as National Whistleblower Day took place in the same city whose federal court would, 247 years later, hear the case at the center of this column.

Nearly two and a half centuries later, Philadelphians are still coming forward to report cheating and fraud — and, as one recent case shows, some are willing to see it through to the end.

A city built on medicine, learning and newcomers

Philadelphia’s favorite fictional son, Rocky Balboa, never expected to beat the champion. His goal was to go the distance. It is a fair description of what a whistleblower case asks of the person who brings it.

The city Rocky ran through has changed. The Census Bureau estimates its population at 1,574,281 as of July 2025 — the second straight year of growth, though still short of the roughly 1.6 million the city counted in 2020. Immigration has been the engine: in the most recent year, more than 7,000 people moved to Philadelphia from abroad, while the city continued to lose residents, on net, to other parts of the country.

It is one of the most diverse large cities in the country. According to The Pew Charitable Trusts’ 2026 State of the City report, about 40 percent of residents are Black, 16.4 percent are Hispanic — up from 5.6 percent in 1990 — and just over 8 percent are Asian. About one resident in six was born outside the United States.

It is also a young city with a strong appetite for education. Pew found that 54 percent of Philadelphians aged 25 to 34 hold a college degree. An earlier Pew analysis found that in the decade before 2016, the city’s median age fell by about a year and a half while the nation’s rose, driven by an influx of young adults. Nearly two-thirds of newcomers were between 18 and 34, and New York City had long been the single largest source of new Philadelphians.

Those newcomers come for work, and much of the work is in medicine and learning. The University of Pennsylvania and Penn Medicine, Children’s Hospital of Philadelphia, Jefferson, Temple and Drexel anchor the economy. A 2022 Federal Reserve Bank of Philadelphia report found that hospitals and universities supply 13 percent of the region’s jobs.

And they stay for the life of the city: the Free Library of Philadelphia, Opera Philadelphia, the parks of Fairmount, and the Philadelphia Zoo, which bills itself as America’s first and opened its gates in 1874.

For the subject of this column, the medical economy is the point. A region with hundreds of thousands of people working inside hospitals, insurers, pharmacies and drug companies is a region with hundreds of thousands of people positioned to see how the bills are actually prepared.

A district that hears these cases

The Justice Department does not publish False Claims Act results by district. The best public estimate comes from The Anti-Fraud Coalition, which assembled figures from Freedom of Information Act responses and public records. Its 2024 analysis of fiscal years 2018 through 2023 found that the Eastern District of Pennsylvania — the federal district that includes Philadelphia — obtained 89 settlements and judgments, far more than any other district. The coalition cautions that its count may miss settlements that were never publicized.

The U.S. Attorney’s Office has said as much itself. In announcing its civil enforcement results for 2019, then-U.S. Attorney William M. McSwain said: “In our District, we have one of the most sophisticated whistleblower bars in the country.”

Nationally, the Justice Department reported more than $6.8 billion in False Claims Act settlements and judgments for the fiscal year ending September 30, 2025 — the highest in the statute’s history. More than $5.7 billion of it involved health care.

One Philadelphia case from that year stands apart, because the government did not bring it and did not join it. A single employee, with her lawyers, took it to trial and won.

The actuary and the pharmacy benefit manager

A question about prices

Sarah Behnke was an actuary in Aetna’s Medicare department. Aetna sold Medicare Part D prescription drug plans and relied on Caremark, the pharmacy benefit manager owned by what is now CVS Health, to buy drugs from pharmacies on its members’ behalf.

Under a “pass-through” contract, Aetna paid Caremark exactly what Caremark paid the pharmacy, plus an administrative fee. In theory, Caremark had nothing to gain from high drug prices on Aetna’s Medicare business.

According to the federal court’s later findings, Ms. Behnke noticed that Caremark was charging Aetna more than other clients paid for the same generic drugs. She complained. So did Terri Swanson, then Aetna’s head of Medicare Part D, who wrote to Caremark that Aetna “cannot be placed in a position of trying to explain to a member or to CMS that generic prices are going up, when all other data in the industry points the other direction.”

Ms. Behnke testified that when Aetna pressed Caremark to negotiate better prices, a Caremark senior vice president, Allison Brown, told her Caremark already had better deals with the pharmacies that it was not passing along — that the arrangement was “like a see-saw,” in which if Aetna paid less, Caremark would have to pay more somewhere else.

That remark became the key to the case. A pass-through manager should not care whether its client’s prices go down. If lower prices for Aetna would cost Caremark money somewhere else, something else was going on.

How the see-saw worked

The answer lay in Caremark’s contracts with three large pharmacy chains — Walgreens, Rite Aid and, in a looser arrangement, CVS Pharmacy. Caremark promised each a minimum average price for generic drugs over the year. If its individual payments fell short of that average, it owed the pharmacy a year-end “reconciliation” payment to make up the difference.

The catch was that the average blended two very different kinds of business: Medicare Part D prescriptions and commercial (non-Medicare) prescriptions. Caremark could pay the pharmacy more on Medicare claims and less on commercial claims and still hit the average.

Ms. Behnke’s summary-judgment brief offered a simple illustration. Suppose five generic drugs each carry a list price of $100. If the plan’s deal requires it to pay 25 percent of list, the plan pays $125. If the pharmacy’s deal requires the PBM to pay 20 percent of list, the pharmacy receives $100. Her claim was that Caremark reported the $125 to Medicare as the cost of the drugs, when the pharmacies, in the end, were paid the equivalent of $100.

Her brief put real numbers to the theory. According to Caremark’s own 2013 reconciliation for Walgreens, as described in that brief, Caremark paid Walgreens about $20.7 million more on Aetna and SilverScript Medicare prescriptions than the average required — and underpaid Walgreens by more than $37.4 million on commercial prescriptions. The Medicare overpayment offset the commercial shortfall. In Ms. Behnke’s telling, Walgreens had effectively given Caremark a $20.7 million credit that was never reported to Medicare.

Why would that matter to the government? Because Medicare subsidizes Part D plans based on what they report they spent on drugs. The government’s statement of interest in the case noted that the Congressional Budget Office estimated Part D spending at $119 billion for 2023 alone, most of it paid by taxpayers. If reported drug costs are inflated, subsidies are inflated with them.

Aetna asks, and outside counsel answers

Ms. Behnke and her colleagues raised their concerns with Aetna’s in-house lawyers in early 2013, and Aetna retained the law firm Crowell & Moring. According to the court, the firm’s 2013 draft memorandum found no “credible evidence” of overpayments or violations — but it contained no legal analysis, rested on factual and legal representations from Caremark that the firm said it could not verify, and recommended further follow-up.

A 2015 memorandum told Aetna it could treat the matter as “resolved” unless and until the Medicare agency issued further guidance, again noting that the firm had undertaken no independent factual investigation. Caremark later cited this review as proof that its practices were lawful. Ms. Behnke called it a whitewash.

Aetna signed a new contract effective January 1, 2015, allowing it to negotiate directly with pharmacies for its Medicare business. An Aetna executive testified that Aetna chose not to adopt guarantees blending Medicare and commercial prescriptions because it did not want to be “on the higher end of the range” of compliance risk.

The lawsuit and the government’s decision

Ms. Behnke filed her qui tam complaint under seal in February 2014. The government investigated and declined to intervene. The case was unsealed in 2018, and Ms. Behnke and her lawyers took it forward on their own.

Caremark moved to dismiss. In April 2020, the court ruled on that motion in a written opinion, and the case moved into discovery. Over the next several years the parties took depositions of Caremark, CVS Pharmacy, Aetna, SilverScript and Rite Aid executives, and each side retained expert witnesses on Medicare reporting, pharmacy contracting and damages.

Summary judgment: six disputes

In 2023, both sides moved for summary judgment. Judge Mitchell S. Goldberg’s 89-page opinion, dated March 25, 2024, framed six disputes: which price had to be reported; whether Caremark’s target with CVS Pharmacy was a real commitment; whether Caremark knew it was doing anything wrong; whether any misstatement was material; whether Caremark caused its clients’ reports; and whether Ms. Behnke could prove damages.

Caremark’s position. Caremark argued that Medicare required each prescription to be reported at its point-of-sale price — the price of a “particular drug.” An annual average across many drugs and many clients, it said, was not the price of any particular drug. And because the pharmacies never paid anything back to Caremark, there was no rebate or discount to report in the year-end reports Medicare uses to capture price concessions. Its experts said its reporting was “industry standard.” It also argued that Medicare officials knew how such guarantees worked and never objected.

Ms. Behnke’s position. She argued that Medicare subsidizes only what a plan “actually paid,” net of any price concessions from any source. Every extra dollar Caremark paid on a Medicare prescription was a dollar it did not have to pay at year’s end. That reduction, she said, was a price concession that had to be reported somewhere — either in the prescription records or in the year-end report.

The ruling on falsity. Judge Goldberg sided with Ms. Behnke as a matter of law. He explained the point with an analogy worth repeating. A service provider takes a client to dinner; each meal costs $50. The host privately asks the server to record the client’s meal as $70 and his own as $30, then tells the client, “your dinner cost $70, my treat.” The total is still $100, and the client’s dinner still cost $50. “The same reasoning applies here,” the judge wrote.

He held that when Caremark had a guaranteed average with a pharmacy and paid no more than that average overall, the average was what Caremark “actually paid.” The difference had to be reported. Because the reports for Walgreens and Rite Aid did not reflect it, they were false.

He rejected the “particular drug” argument with another homely example: if a store sells apples for $2, that is the price of that particular fruit, whether or not it also sells oranges at the same price. And he disposed of the industry-custom defense in a sentence: Caremark “has not provided a single example of another Part D sponsor or PBM that reported prices consistent with this alleged custom.” Even if such a custom existed, he wrote, it could not override the regulation’s text.

The judge also allowed himself a moment of humor. After framing the central question in one very long sentence, he added a footnote apologizing to Mark Twain, who may have said he did not have time to write a short letter, so he wrote a long one instead.

Proof by averages. Caremark argued that Ms. Behnke had not identified any individual false claim — only inflated averages. The judge disagreed, noting that Medicare reconciles subsidies in the aggregate at year’s end. He compared the case to one in which the government proved false medical bills by showing services adding up to more than 24 hours in a day, without identifying which service pushed the total over.

CVS Pharmacy. Caremark won one point outright. Caremark and CVS Pharmacy, sister companies, had no written average-price guarantee — only a “target.” For 2011 and 2012, the judge found the evidence of any target too thin, calling it a “mere … scintilla.” For 2013 through 2016, he left the question for trial.

What Medicare knew. Caremark pointed to a 2016 call and follow-up email in which a Caremark executive told Medicare officials that it had average-price guarantees with “a few pharmacies,” applied “across the pharmacy book of business.” The judge found that this did not settle the matter, observing that a factfinder might not regard the phrase “a few pharmacies” as fair notice when the pharmacies were CVS, Rite Aid and Walgreens.

Caremark’s own documents. On knowledge, the judge noted that Ms. Behnke had no “smoking gun,” but found enough for trial. He described internal Caremark materials she relied on: an email explaining that pharmacy agreements did not allow Caremark to price drugs however a client wanted “and it not cost CVS Caremark”; a 2014 document titled “Medicare Part D Pricing Guidelines,” whose sixth guideline read, “Do not create documents that link how increased payments to pharmacies for Medicare Part D drugs may relate to reduced payments to pharmacies for commercial drugs”; and a 2014 presentation that suggested a separate client-specific pharmacy contract would make “the optics look better.” Caremark responded that the guidelines concerned a different federal law, the Anti-Kickback Statute.

Causation. The judge ruled for Ms. Behnke on whether Caremark caused SilverScript’s reports, because Caremark itself submitted SilverScript’s prescription records and prepared its year-end reports “in a CMS-ready format.” He left Aetna for trial.

The government speaks without joining

Although it had declined to intervene, the United States filed a statement of interest in October 2023. It took no side on the facts but made three points.

  • Medicare relies on accurate drug-price reporting. Because of the Part D “noninterference” clause, the government at the time could not negotiate or set drug prices itself and depended entirely on plan sponsors and their pharmacy benefit managers to report prices correctly.
  • A plan sponsor’s own duty to report accurately would not, by itself, excuse a PBM whose conduct was a substantial factor in causing false reports.
  • Under Third Circuit law, a defendant arguing that the government knew and did not care faces what the government called “an extremely high bar.” Awareness of allegations, it noted, is not the same as knowledge that fraud occurred.

It is a reminder that a declined case is not an abandoned one. The government remains the real party in interest and shares in any recovery.

Trial and judgment

Judge Goldberg heard an eight-day bench trial beginning March 10, 2025. In a June 25, 2025 opinion, he found Caremark liable for false reporting on prescriptions filled at Walgreens and Rite Aid and set the government’s damages at $95 million — well below the roughly $274 million that Ms. Behnke’s damages expert had calculated across all the years and pharmacies at summary judgment. The claims based on CVS Pharmacy did not survive trial: the court found she had not proved that Caremark’s target with its sister company was negotiated and binding.

According to published reports of the opinion, the judge did not find that Caremark acted with actual knowledge but found reckless disregard and deliberate ignorance — each sufficient under the False Claims Act.

In August 2025, he trebled the damages to $285 million and imposed $4.87 million in civil penalties, near the top of the statutory range, entering judgment against three Caremark entities for $289,873,500. CVS has said it was disappointed by the findings against Caremark and has appealed to the Third Circuit. The judgment is not final.

Berger Montague, the Philadelphia firm, represented Ms. Behnke at trial; David F. Sorensen led the trial team. They tried to judgment a case the government had declined to join.

Why one case can matter for many

In my experience, cases like this work the way a spearhead does in a campaign. One case is fought hard, through discovery, summary judgment and trial. If one side wins decisively, the cases that follow tend to settle rather than be litigated, because everyone can see where the line is.

That is an observation, not a prediction, and this case is not finished. A district court ruling binds no other court, and the Third Circuit may see the regulation differently. But the summary-judgment opinion has already done something important: it has explained, in plain language and as a matter of law, why an average-price guarantee can make a reported price false. Defense lawyers have noticed. One national law firm wrote after the trial ruling that it should put pharmacy benefit managers on notice.

Other recent Philadelphia cases

Behnke is the exception in one respect: most of the district’s cases end in settlement. The pattern of insiders and long timelines, however, holds.

Independence Blue Cross — $22.5 million (September 2026). The Philadelphia-based insurer agreed to resolve allegations that, for payment years 2017 through 2021, it used nurse chart reviews to add Medicare Advantage diagnosis codes while ignoring the same reviews when they showed codes it had already reported were unsupported. The case was brought by a former IBX employee, who will receive $3,825,000. The claims are allegations only. In a separate 2020 case brought by another IBX employee and taken over by the government, IBX affiliates paid $2.25 million over allegedly inflated Medicare Advantage bids.

Recovery Centers of America — $2 million (December 2025). The King of Prussia addiction-treatment company resolved allegations involving controlled-substance handling and billing for treatment it allegedly did not adequately provide. According to her lawyers at Kang Haggerty, the whistleblower was a former outcomes supervisor at the company’s headquarters. The case was filed in 2017.

Blessings 4 Ever Home Care — $1 million (August 2026). The government alleged that this Philadelphia agency backdated or fabricated 181 training certificates and billed Medicaid for 1,141 home-care claims on days when 209 beneficiaries were hospital inpatients. The relator will receive 21 percent of the federal recovery. The claims are allegations only.

Universal Health Services — $117 million (2020). The King of Prussia behavioral-health company resolved 18 whistleblower cases from Philadelphia and three other districts over allegedly unnecessary inpatient services and improper inducements. The Philadelphia U.S. Attorney’s Office handled them; whistleblowers shared more than $15.8 million.

Electrostim Medical Services — $20 million (2024). A Florida supplier of electrical-stimulation devices and its founder resolved allegations of billing TRICARE, the military health program, for excessive and unnecessary supplies. The company denied wrongdoing.

Grosfillex — $4.9 million (2025). On the trade side, this outdoor-furniture maker, whose North American headquarters is in Berks County, resolved allegations that it evaded duties on Chinese aluminum parts, in part by packaging them as sham furniture “kits.” Former employee Edward Wisner, represented by David J. Caputo of Youman & Caputo in Philadelphia, received $962,662.74.

Linde — $22.2 million (2020). A German engineering company and its U.S. subsidiary resolved allegations that they misrepresented the nature, classification and value of imports. The relator, represented by Phillips & Cohen, received about $3.7 million.

What the Philadelphia cases share

  • Insiders who understood the numbers. An actuary, insurer employees, a manufacturer’s employee, an outcomes supervisor.
  • Knowledge from outside the company. Ms. Behnke worked for Caremark’s client, not Caremark. The information that produced a $290 million judgment came from the customer’s side of the contract.
  • The defendants’ own records. Reconciliation spreadsheets, chart reviews, training certificates and customs forms.
  • Long horizons. Behnke took eleven years from filing to judgment. Other cases took five to eight.
  • Persistence without the government. Behnke was declined. It was tried anyway.

Congress designed the False Claims Act so that the government shares a portion of what it recovers — generally between 15 and 30 percent — with the person who brings the fraud to light. The idea is older than the statute: it was in the Continental Congress’s resolution of 1778, passed in this city, that those who report wrongdoing should be protected for doing so.

Philadelphia has kept faith with that idea. Its federal court hears these cases in numbers few districts match, its bar knows how to try them, and its people — drawn from every part of the world to work in medicine, learning and commerce — keep coming forward.

Jeff Newman Law is a national whistleblower law firm that handles whistleblower cases under the False Claims Act, including healthcare and tariff fraud matters and other kinds of cases. Reach the firm at www.jeffnewmanlaw.com or 617-823-3217.

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