CVS Caremark Agrees To Pay $38.5M To Settle Allegations That It Did Not Pass On Rebates, Discounts To Patients, Employers

Main Category: Pharmacy / Pharmacist
Also Included In: Litigation / Medical Malpractice;  Health Insurance / Medical Insurance
Article Date: 18 Feb 2008 - 0:00 PDT

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CVS Caremark has agreed to a $38.5 million settlement in a multistate civil deceptive-practices lawsuit against pharmacy benefit manager Caremark filed by 28 attorneys general, the Chicago Tribune reports. The attorneys general, led by Lisa Madigan (D) of Illinois and Douglas Ganslar (D) of Maryland, allege that Caremark "engaged in deceptive business practices" by informing physicians that patients or health plans could save money if patients were switched to certain brand-name prescription drugs (Miller, Chicago Tribune, 2/14).

However, the switch often saved patients and health plans only small amounts or increased their costs, while increasing Caremark's profits, Connecticut Attorney General Richard Blumenthal (D) said (Levick, Hartford Courant, 2/15). Pennsylvania Attorney General Tom Corbett (R) said the PBM kept discounts and rebates that should have been passed on to employers and patients (Levy, AP/San Francisco Chronicle, 2/14). In addition, Caremark did not "adequately inform doctors" of the full financial effect of the switch and did not disclose that the switch would increase Caremark's profits, the lawsuit alleges (Chicago Tribune, 2/14).

Settlement
Under the settlement, Caremark will pay $38.5 million to 28 states and Washington, D.C. (AP/San Francisco Chronicle, 2/14). States will receive $22 million of the settlement, and they must use the funds to benefit low-income, disabled or elderly patients or to educate residents about cost difference among prescription drugs (Harris, Bloomberg/Philadelphia Inquirer, 2/15). Caremark must pay $2.5 million to reimburse plan members for the increased costs associated with switching to certain cholesterol treatments (AP/San Francisco Chronicle, 2/14). Caremark also will pay $16.5 million to reimburse states for the cost of the investigation (Chicago Tribune, 2/14).

In addition, the settlement prohibits Caremark from requesting prescription drug switches in certain cases, such as when the cost to the patient would be higher with the new prescription drug; when the original prescription drug's patent will expire within six months; and when patients were switched from a similar prescription drug within the previous two years (Hartford Courant, 2/15). Patients also have the ability to decline a switch from the prescribed treatment to the prescription offered by the pharmacy under the settlement, Madigan said (Bloomberg/Philadelphia Inquirer, 2/15).

Response
Caremark said it entered into the agreement to reaffirm its commitment to complying with consumer protection laws (Lade, South Florida Sun-Sentinel, 2/15). Caremark on Thursday said that the company and its subsidiaries have "expressly denied any and all allegations, and there has been no finding of wrongdoing or inappropriate business conduct on their part" (Hartford Courant, 2/15). The settlement "will not result in significant changes to current business practices," Caremark said (Chicago Tribune, 2/14). CVS Caremark said that the settlement will not affect the company's 2008 financial outlook (Bloomberg/Philadelphia Inquirer, 2/15).

Corbett said, "Caremark was operating against their clients' interests by retaining rebates and discounts that they were obligated to pass on to their clients," adding, "This agreement stops the deceptive business practices and takes the necessary steps to protect health plans and patients" (AP/San Francisco Chronicle, 2/14).

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