CVS Caremark’s Latest Legal Headaches? A Record $77.6 Million Settlement with DEA in Meth Case and a Scolding, Fine by a California Court

The already extensive list of government entities scrutinizing CVS Caremark’s behavior just got longer. DEA joins the alphabet soup with a record $77.6 million settlement, which includes a $75 million fine (the largest ever under the Controlled Substances Act) and the forfeiture of $2.6 million in profits from illegal sales. Could the Centers for Medicare and Medicaid Services (CMS) be next? Meanwhile, a California court upheld a $42,000 fine against Caremark for acting in “bad faith” in a whistleblower lawsuit.

In a statement, the U.S. Drug Enforcement Administration said the company, admitted that it unlawfully sold pseudoephedrine [PSE] to criminals who made methamphetamine. As part of the agreement with federal prosecutors, CVS has agreed to pay $75 million in civil penalties and to forfeit the $2.6 million in profits the company earned as a result of the illegal conduct.”

According to DEA, individuals seeking PSE to make meth “inundated CVS stores in Los Angeles and Orange Counties, and later stores in the Las Vegas area, to purchase cough and cold remedies, sometimes cleaning out store shelves. For more than a year, CVS failed to change its sales practices to prevent criminals from purchasing excessive amounts of pseudoephedrine at its stores.” The problem was documented in 25 states altogether. In addition to the fine, DEA will formally review the company’s compliance efforts for the next five years.

In its own statement, CVS Caremark said a “distribution center in California failed to monitor and report excessive PSE sales by CVS/pharmacy stores.”

Beyond the press releases, some intrepid reporters with the Los Angeles Times, Associated Press uncovered some interesting nuggets in an already remarkable story.

“CVS employees and store managers notified management about the large amount of pseudoephedrine purchased in California and Nevada, but prosecutors said the company failed to promptly investigate,” according to the AP, adding that sales of the products increased 150 percent in Los Angeles County.

The Los Angeles Times reports that, during the period in question, “CVS sold more generic pseudoephedrine in Southern California stores than in their stores in the rest of the country combined. … One customer made 10 transactions in 53 minutes at a CVS in Huntington Park.”

Also this week, the California Court of Appeals affirmed the imposition of sanctions against Caremark for abuse of the discovery process in a whistleblower suit.  The trial court specifically found that Caremark had “acted in bad faith in all aspects of the production of their prescription data base” and had “consistently failed to be candid with this court.” The fine was $42,978.43

Obviously, non-CVS pharmacies are hardly immune from the occasional mistake or the rare bad apple. But the sheer volume of questions and government activity surrounding CVS Caremark is in a league of its own.

The DEA settlement follows an inquiry launched in late September by the Senate Special Committee on Aging, which is focused on allegations surrounding Medicare beneficiaries. That could easily trigger a subsequent investigation by a CMS increasingly focused on waste, fraud and abuse.

For a synopsis of CVS Caremark oversight prior to this week, read: CVS Caremark’s Analyst Day Comes Amid Mounting Problems for the Company.

3 Responses to “CVS Caremark’s Latest Legal Headaches? A Record $77.6 Million Settlement with DEA in Meth Case and a Scolding, Fine by a California Court”

  1. 1 ralph stanzione October 19, 2010 at 2:57 pm

    finally a fine that makes sense for cvs. generally they have played the odds that the fine would be much less than the earnings on past infractions and used this philosophy to bulldoze the competition and the law.

    finally some real pain in the bottom line!!

  2. 2 angry October 25, 2010 at 1:50 am

    Now I know why I am losing my job. Thanks alot CVS/Caremark. You don’t care about your hard working employees at all.

  3. 3 Rxpert August 4, 2011 at 7:36 am

    You are naive if you think any corporation cares about you at all. It matters not if that corporation is CVS/Caremark, Walgreens, Target, Walmart, etc. They only care about the bottom line delivered to Wall Street. The sooner you realize this, the better off you will be. Keep your mouth shut, do your job, and keep your eyes open for any corporate misbehavior.

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