Eastern District of Pennsylvania Rejects Novel False Claims Act Theory in CVS Health Case

A notable new False Claims Act (FCA) decision out of the Eastern District of Pennsylvania offers a thoughtful and novel analysis of “worthless services” claims, according to Rogers Joseph O’Donnell, P.C. shareholder Gregory P. Rosen.

In U.S. ex rel. Ellis v. CVS Health Corp., the relator alleged that CVS shipped temperature-sensitive biologic medications in packaging prone to “flash-freezing” and then billed Medicare and Medicaid for drugs that were supposedly worthless.

Rosen notes that a worthless services claim requires proof that the products at issue were actually medically worthless. In this case, however, the manufacturers’ own studies showed that the drugs could tolerate colder temperatures for longer than any timespan at issue in the litigation.

With no evidence of actual damage, the relator advanced alternative theories based on systemic risk and economic worthlessness. The relator’s economist argued that the drugs were economically worthless even if their efficacy and safety were unaffected.

Judge Gerald McHugh rejected the arguments, concluding that damage is damage and that market value is not the metric under the FCA.

Under the court’s analysis, “[i]f the drug works, paying for it simply isn’t fraud,” notes Rosen. 

Given the extensive procedural history, the large volume of disputes over sealed filings, and the motions practice, this case represents a typical qui tam posture with an atypical factual predicate. 

“As the court described, the FCA is ‘grounded in the concept of fraud,’ and this case simply didn’t pass muster,” says Rosen. “Keep in mind that this result still occurred, of course, after years of ‘voluminous discovery’ and protracted, costly litigation. It’s a reminder to all litigants to be prepared for the long-term in the FCA space.”  

The decision is U.S. ex rel. Ellis v. CVS Health Corp., No. 2:16-cv-01582 (E.D. Pa. June 22, 2026).

Rosen is a former assistant U.S. attorney who prosecuted fraud cases while with the U.S. Attorney’s Office in Washington, D.C. He represents clients in criminal and regulatory matters involving the False Claims Act, particularly in government contracts, procurement and federal fund recipient fraud. He also handles high-stakes financial and regulatory investigations, among other matters.