CVS Caremark: 24 States Part Of Probe; Another OIG Subpoena

Twenty-four states are participating in the multistate investigation of CVS Caremark Corp.'s (CVS) business practices, as are Washington, D.C., and Los Angeles County, the merged drug retailer and pharmacy benefits manager disclosed Tuesday.

In a separate matter, the company said it received a federal subpoena in March related to an investigation of possibly improper Medicaid and Medicaid payment claims.

The multistate probe, the existence of which news organizations reported several weeks ago, involves issues similar to those being investigated by the Federal Trade Commission, CVS Caremark said in its quarterly filing with the Securities and Exchange Commission.

The FTC hasn't stated specifically the nature of its nonpublic probe, although an official recently said the staffs of the agency's consumer-protection and competition bureaus are working on it. The FTC notified CVS Caremark of its probe last summer.

Critics say the 2007 merger that formed CVS Caremark created conflicts of interest that unfairly hurt consumers and competing independent pharmacists and violated patient privacy--assertions the company denies.

CVS said it learned of the multistate probe in March and is cooperating with the investigations and producing documents and other information, and "remains confident that its business practices and service offerings...are being conducted in compliance with the antitrust laws."

In the other matter, CVS disclosed that it had received a subpoena in March from the Department of Health and Human Services' Office of Inspector General requesting information about programs in which the company offered to give customers gift cards, cash, merchandise or discounts for transferring prescriptions to its pharmacies.

The subpoena relates to a probe of possible false or otherwise improper claims for payment under the Medicare and Medicaid programs, CVS Caremark said. It follows a January subpoena, also from the OIG, and also in connection with a probe of possible false or improper payments claims under Medicare and Medicaid. The earlier subpoena involved pharmacy claims data for customers with both Medicaid and private insurance coverage, among a variety of other documents.

CVS said it is cooperating with those requests as well.

The company is the subject of other government investigations.

Since late 2008, it has been responding to several subpoenas from the Drug Enforcement Administration seeking information regarding its distribution of products containing the decongestant pseudoephedrine at certain retail pharmacies and from a California distribution center. The government regulates distribution of pseudoephedrine in efforts to stop it from being diverted for use in illegal methamphetamine production.

Last September, the company started discussions with the U.S. attorney's office in central California and the DEA regarding whether, in late 2007 and 2008, CVS distributed the drug in violation of federal law.

-By Dinah Wisenberg Brin, Dow Jones Newswires; 215-656-8285; [e-mail]