The Justice Department joined a whistleblower suit against Caremark Rx, Nashville, alleging that the pharmacy benefits manager allowed Medicaid programs to pick up the tab for drugs Caremark should have covered.
Arkansas, Florida, Tennessee and Texas also have joined the False Claims Act suit, which was filed by a former Caremark employee in U.S. District Court in San Antonio in 1999.
The employee said Caremark allowed state Medicaid programs to be billed as the primary payer, when the programs should have been billed as a secondary payer.
The alleged damages may be up to $500 million, government sources said.
Caremark spokesman Gerard Carney said the company "strenuously refutes the claims," which he characterized as rife with "factual inaccuracies and unsubstantiated conclusions."
Caremark said it is cooperating with the 5-year-old investigation.
The company, the nation's second-largest PBM, provides pharmacy benefit services to more than 1,000 health plans.
Last week, when Texas Attorney General Greg Abbott intervened in the suit, Abbott vowed to "send Caremark a past-due bill for its conduct."