CVS to pay millions to settle drug-cost case

CVS Caremark Corp., the biggest U.S. drugstore chain by number of stores, will pay $38.5 million to settle claims its pharmacy-benefits unit unnecessarily drove up prescription-drug costs.

"Caremark engaged in deceptive business practices by encouraging doctors to switch patients to different brand-name prescription drugs and representing that the patients and/or health plans would save money," Illinois Attorney General Lisa Madigan said yesterday in a statement announcing the accord.

The 28-state agreement requires the company to disclose to patients when the drug its pharmacies dispense will be more expensive than the doctor-prescribed drug or whether an equivalent generic drug is available. It also gives patients the option to decline a switch from the doctor's prescribed medication to one proffered by the pharmacy, Madigan said.

Pennsylvania Attorney General Tom Corbett said that $22 million of the states' share must be used to benefit low-income, disabled or elderly consumers or to educate consumers about cost differences among medications. Pennsylvania will receive $1.2 million for this purpose, Corbett said.

CVS, which operates about 6,200 stores in the United States, bought the Nashville prescription-plan administrator Caremark Rx Inc. last March and in 2006 acquired health clinics to compete with Walgreen Co., the largest U.S. drugstore chain by sales.

CVS, of Woonsocket, R.I., issued a statement confirming the agreement and denying any allegations of misconduct.

"There has been no express finding of wrongdoing or inappropriate business conduct," the company said. It also said that the amounts to be paid had accrued in previous quarters and that the deal would not affect the company's 2008 financial results.

The settlement includes $2.5 million in restitution for customers who unnecessarily switched to cholesterol-lowering drugs that cost them more, Connecticut Attorney General Richard Blumenthal said in his own statement.

"This agreement rightly returns millions of dollars to consumers encouraged to unnecessarily switch to more expensive medications, unfairly fattening Caremark's bottom line," Blumenthal said.

Other states participating in the agreement include California, Florida, Maryland, Massachusetts and Texas, he said.

Shares of CVS fell 90 cents to close at $39.82 in New York Stock Exchange trading.