CVS Health Inc. (CVS) just wrote a check for $37.76 million to settle allegations that it spent a decade billing federal healthcare programs for insulin refills that were unnecessary, premature, or just plain wrong.

U.S. Attorney Jay Clayton for the Southern District of New York announced Tuesday that federal prosecutors filed and simultaneously settled a civil healthcare fraud lawsuit against CVS Pharmacy, resolving claims the company violated the False Claims Act between 2010 and 2020. Multiple federal oversight agencies said CVS repeatedly sought reimbursement for refills that patients didn't need yet or that exceeded what doctors actually prescribed.

Here's how the alleged scheme worked: CVS was billing Medicare, Medicaid, TRICARE, and the Federal Employees Health Benefits Program for insulin pens that went beyond prescription requirements. The crux of the problem was something called "days-of-supply" reporting, which is basically the metric pharmacy benefit managers use to figure out when a patient can legitimately get a refill.

According to prosecutors, CVS often under-reported this number. Instead of recording the true quantity of insulin dispensed, the company would report only the maximum days allowed under a patient's insurance plan. This little accounting trick meant CVS could avoid claim denials while giving patients more insulin than their prescriptions called for.

The flawed data then fed into CVS's auto-refill system, which calculated future refill dates based on these inaccurate numbers. The result? The system automatically processed premature refills, and some patients ended up accumulating excess insulin, which creates safety issues when medication expires.

Perhaps most damning: federal officials say CVS management knew about the problem. Internal audits and chargebacks from pharmacy benefit managers flagged the over-dispensing issue, but the company apparently didn't fix it for several years.

Under the settlement terms, CVS will pay $24.4 million to the federal government, with the remainder going to states participating in the affected healthcare programs. The company also admitted to certain conduct described in the complaint, including receiving government payments for refills that should never have been reimbursed.

This isn't CVS's first rodeo with billing disputes. The pharmacy giant previously paid $18.3 million to resolve alleged Medi-Cal billing failures, suggesting a pattern of issues with government healthcare program reimbursements.

CVS Price Action: CVS Health shares were down 1.61% at $76.37 at the time of publication on Wednesday.