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CVS settles Medicare prescription lawsuit for $5 million

Robin Wulffson MD's picture
CVS Caremark, Federal Trade Commission, Medicare, drug prices

WASHINGTON, DC - On January 12, CVS Caremark agreed to pay $5 million to settle charges by the Federal Trade Commission (FTC) that the retail pharmacy and healthcare corporation had misrepresented the price of certain prescription drugs in one of its Medicare drug plans, causing many seniors to pay significantly higher prices than advertised. The settlement came more than two years of investigation by the FTC.

The settlement comes at a time of intensive government scrutiny of pharmacy benefit managers such as CVS Caremark, which manage prescription drug plans for employers and insurers. The FTC is also reviewing the proposed merger of the two main competitors to CVS Caremark: Express Scripts and Medco Health. In that case, the FTC is evaluating whether the combination would create an entity with too large of a market share.

In regard to CVS Caremark, FTC examined whether the merger of one of the largest drugstore chains with one of the largest pharmacy benefits managers had given the company an unfair market advantage in steering garnering customers as well as information about competing pharmacies. CVS Caremark works with a network of about 65,000 pharmacies, including more than 7,300 of its own drugstores.

The CVS lawsuit was prompted by concerns raised in 2009 by some legislators, labor unions, pharmacies and consumer groups regarding potentially anticompetitive and anticonsumer business practices by the company. Together with the January 12 settlement, the FTC dismissed the more serious allegations of anticompetitive behavior. The agency found only one violation: one of the company’s Medicare drug plans, then called RxAmerica, misled some consumers regarding pharmaceutical prices. In a news release, the FTC noted, “After a thorough and comprehensive review of other consumer protection and competition issues in this matter, the FTC issued a letter closing the investigation.”

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In a statement, CVS Caremark noted that the settlement related only to the practices of RxAmerica, a subsidiary of Longs Drug Stores; these practices were employed before CVS Caremark acquired Longs in October 2008. Although much of the incorrect pricing did occur before the purchase, the FTC claimed that some continued after the acquisition.

CVS Caremark explained that RxAmerica had inadvertently posted inaccurate prices for certain generic drugs on a Web site maintained by the Centers for Medicare and Medicaid Services and that the company had rectified the pricing problem upon becoming aware of it. “CVS Caremark is pleased to have reached an agreement with the FTC that ends the investigation and enables us to continue our focus on offering unique, innovative products and services that differentiate us and benefit consumers,” said Larry Merlo, the chief executive of CVS Caremark, in the statement.

Another incorrect pricing incident occurred with CVS Caremark in 2010 when the company notified the Centers for Medicare and Medicaid Services that from October 2009 to January 2010, a computer error had caused it to provide incorrect prices. The advertised prices were about 4% percent lower than what the company ever planned to charge for brand-name prescription drugs available through its SilverScript Medicare drug plan. CVS Caremark offered to refund the price difference to customers who had paid more than they had expected. It also offered to help them change to another plan.

Source: Federal Trade Commission

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