CVS Caremark Issues Statement on Settlement Concerning Retail Dispensing Practices for Ranitidine
By way of background, for many years, the Company purchased and stocked the capsule form of ranitidine across its chain of retail stores for dispensing to all patients, not just Medicaid recipients, due to the fact that the acquisition cost of capsules was lower than the cost of tablets. At various times, certain state Medicaid programs reimbursed pharmacies at a higher rate for capsules than for tablets. Both of these dosage forms for ranitidine contain the same active ingredients. The government alleged that the practice of dispensing capsules instead of tablets was motivated by a desire to increase Medicaid reimbursement. The Company has expressly denied this allegation.
The settlement calls for payment by the Company of $36.7 million, plus approximately $800,000 in investigative costs and other fees. These payments have been fully accrued for in prior fiscal periods and will not affect the Company's 2008 earnings results. The investigation commenced in 2001 and has been previously disclosed in the Company's prior SEC filings. The Company agreed to settle the matter in order to defray the distraction, burden and expense of continuing litigation. The government has been engaged in an investigation of the dispensing practices of various pharmacies related to ranitidine for many years.
The Company also announced its entry into a Corporate Integrity Agreement (CIA) with the Office of the Inspector General, which evidences the Company's strong commitment to compliance with the law as well as adherence to the highest ethical standards. Among other things, the CIA is applicable to the company's retail and mail service operations and calls for maintaining the Company's existing compliance program, code of conduct and an employee ethics "hotline," as well as instituting certain employee training.