Health Law Daily Wrap Up, FALSE CLAIMS ACT—E.D. Pa.: Pharmacy’s usage of certain ‘Dispense as Written’ (DAW) Codes, not material to government’s decision to pay, (Aug 7, 2026)

By Jeffrey H. Brochin, J.D.

Because, as a matter of law, the usage of DAW Code “0” was not material to government payment decisions, no genuine issues of material fact remained for trial, and summary judgement accordingly awarded to CVS entities.

A federal District Court in Pennsylvania has granted the Motions for Summary Judgement filed by CVS Health Corporation (Health), CVS Pharmacy, Inc. (Pharmacy), Caremark Part D Services, LLC, Caremark, LLC (Caremark), and SilverScript Insurance Company, LLC (SilverScript), (collectively referred to as CVS Entities) in a False Claims Act (FCA) lawsuit brought by a Relator who claimed violations of the FCA based on CVS Entities’ use of DAW Codes when submitting Prescription Drug Event (PDE) records. The parties disputed what regulatory entity, if any, was sanctioned by CMS to provide the authoritative interpretation of when the codes are appropriately used, and CMS never disciplined the CVS Entities in connection with any of their PDE submissions (United States of America ex rel. Ellsworth and Associates, LLC v. CVS Health Corporation, No. 2:19-cv-02553-JMY (E.D. Pa. July 31, 2026)).

Formulary coverage determinations. Medicare Part D plan sponsors (sponsors) do not cover every drug, rather, to manage costs, steer beneficiaries towards certain drugs, and gain negotiating leverage with drug manufactures, Plan D sponsors cover only a specific selection of drugs from an approved list known as a formulary. The formulary must get the approval of CMS determines that the formulary meets various requirements. When a Medicare Plan D beneficiary goes to purchase a specific prescription drug, the plan sponsor must determine whether the drug is covered by the beneficiary’s plan, a process known as a coverage determination, which assesses whether a drug is included on the plan’s formulary. However, even if a particular drug is not included on a plan’s formulary, a beneficiary may still be able to obtain coverage for the drug by making a formulary exception request.

When prescription drugs are dispensed to Medicare Part D beneficiaries, the PBM then adjudicates that claim in real time, and if approved, the prescription is dispensed to the beneficiary, and the PBM reimburses the pharmacy for dispensing the drug. The PBM then creates a Prescription Drug Event (PDE) record which is transmitted to CMS as the basis for CMS’s subsidy payments under Part D.

Formulary exception requests. CMS requires 51 data fields to be populated in the PDE record which provide general information as well as specific details about the dispensation of particular drugs. Relevant to the instant case is the field of ‘Dispense as Written’ (DAW) Codes, a set of ten numerical codes that provide information on the circumstances in which the decision to distribute a brand drug over its generic alternative was made. At issue here were DAW Codes 0 and 9. The parties agreed that CMS defines DAW 0 as “No Product Selection Indicated” and DAW 9 as “Other.” What was in dispute however, was what entity, if any, was sanctioned by CMS to provide the authoritative interpretation of when those codes were appropriately used.

Relator cited that the National Counsel for Prescription Drug Programs (NCPDP) External Code List for the proposition that DAW 0 is to be used only for “prescriptions for single source brand, co-brand/co-licensed, or generic products” and may never be used for a brand drug when there exists a generic version of the drug on the market. DAW 9, by contrast, is to be used when “generic substitution is permitted, but the plan’s formulary requests the brand product.” CVS Entities countered that the External Code List merely provides non-binding guidance, compliance with which is not mandated by CMS.

Three theories of liability. The Relator’s Third Amended Complaint asserted three counts under the FCA against CVS Entities: Count I alleged violation of 31 U.S.C. § 3729(a)(1)(A) by “knowingly presenting, or causing to be presented, a false or fraudulent claim for payment or approval;” Count II alleged violation of 31 U.S.C. § 3729(a)(1)(B) by “knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim” and Count III alleged violation of 31 U.S.C. § 3729(a)(1)(C) by “conspiring to commit a violation” of § 3729(a)(1)(A) and § 3729(a)(1)(B). In support of those claims, Relator asserted several theories of liability as described below.

Formular exceptions theory. This theory posited that Caremark/SilverScript defrauded the government by making it more difficult, if not impossible, for beneficiaries who were entitled to receive generic versions of the drugs Harvoni and Epclusa, to receive those drugs through the formulary exceptions process. According to Relator, by summarily blocking formulary exception requests, Caremark/SilverScript required beneficiaries (and by extension the government) to pay for more expensive brand drugs. SilverScript allegedly adopted a “blanket policy” to deny all formulary exception requests for Harvoni and Epclusa without even reviewing the merits of those requests. Relator further alleged that SilverScript maintained procedures that misled beneficiaries into thinking formulary exceptions were either not available or would lead to greater costs.

DAW coding theory. Relator asserted that CVS Entities directly violated the FCA by submitting, or allowing to be submitted, PDE records containing erroneous DAW codes. Specifically, Relator alleged that Pharmacy entered DAW 0 when only DAW 9 was appropriate, and that Caremark/SilverScript incorporated these entries into the PDE records it submitted to CMS. The inaccurate submissions allegedly constituted false certifications to the government in violation of the FCA. This resulted in “overcharging” the government for prescription drugs.

Relator further implied that CVS Entities’ usage of DAW 0 enabled them to conceal the formulary exception scheme by disguising the fact that Pharmacy was distributing brand versions of the drugs even when generic equivalents were available.

Conspiracy theory. Relator next alleged that CVS Entities conspired among themselves and with drug manufacturers to prevent Medicare Part D beneficiaries from accessing cheaper generic versions of brand drugs in order to profit from rebate agreements with brand drug manufacturers. In essence, Relator’s argument was that the decision to place the drugs on SilverScript’s formulary was not the product of arms-length negotiations, but rather improper collusion between the drug manufacturers and CVS Entities.

Essentially a policy disagreement. Relator argued that to the extent CMS conducted audits of CVS Entities, those audits did not include a review of PDE data, and even if PDE data was reviewed, that did not prove that CMS even discovered the allegedly erroneous use of DAW 0 during those reviews. However, the court rejected that argument, noting that the court’s inquiry was not whether DAW codes are useful or even required, but whether there was any evidence that could lead a reasonable jury to conclude that they were material to a payment decision. Furthermore, only remarkable oversight would lead CMS to expect to pay a generic price based on DAW 0 despite approving a formulary that dictated the brand drug be dispensed and despite receiving PDE records identifying with specificity that the brand drug that was dispensed. It was therefore unsurprising that the government had never denied payment on the basis of an incorrect submission of DAW 0.

Even if CMS was misled into expecting to pay a generic price, it could not be overemphasized that the brand price CMS paid matched brand drugs that were dispensed. The court concluded that even if the entry of DAW codes was erroneous, no reasonable jury could find that such error was material to the government’s payment decisions. At base, the government got what it paid for: beneficiaries received the brand drugs listed on the formulary that CMS approved, and the government was billed the appropriate brand price., in other words, the government got what it paid for.

Conspiracy count failed. Lastly, the court turned to the FCA conspiracy count, observing “there can be no liability for conspiracy where there is no underlying violation of the FCA.” Conspiracy theories under the FCA cannot stand on their own without an underlying violation of the FCA, and therefore, the court granted summary judgment with respect to this theory of liability as well.

The case is No. 2:19-cv-02553-JMY.

Judge: Young, J.

Attorneys: Joe H. Tucker, Jr (Tucker Law Group) for Ellsworth Associates, LLP. Edward B. Diskant (McDermott Will & Schulte) for CVS Health Corp.

Companies: Ellsworth Associates, LLP; CVS Health Corp.

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