March 18, 2008 CVS Caremark to settle Medicaid fraud claims for $37M

CHICAGO (AP) - CVS Caremark Corp. agreed to pay almost $37
million to nearly two dozen states and the federal government to
settle claims that the nation's largest pharmacy chain billed
Medicaid programs for a more expensive formulation of an antacid,
authorities said Tuesday.

The settlement in the case - the first of its kind for a retail
pharmacy company - came after a lengthy investigation that began in
2001 a suburban Chicago pharmacist alerted authorities.

Attorneys said the nation's largest pharmacy chain gave Medicaid
patients capsules of Ranitidine, a generic
version of the heartburn medication Zantac, instead of even less
expensive tablets. Both generic versions of the medication have the
same active ingredient.

Authorities said the switch is illegal and allowed the company
to charge state Medicaid programs more than four times as much for
each pill, leading to a bigger profit.

"The Medicaid program is an important part of the medical
safety net for our neediest citizens," Massachusetts Attorney
General Martha Coakley said in a statement. "In today's economic
climate, the state must account for every penny spent."

But Woonsocket, R.I-based CVS, which admitted no wrongdoing in
the case, said money had nothing to do with its dispensing
decisions.

"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," executives said in a statement.

Still, the two versions of the medication are technically
considered different drugs, said Michael Behn, a Chicago lawyer who
represented the whistleblower in the case.

"Legally, switching tablets for capsules is the same as
switching Zantac for Prozac," he said. "A prescription for a
tablet is not a scrip for the capsule, just as a price for the
tablet is not the price for the capsule."

CVS will pay the federal government about $21 million as part of
the settlement. The remaining $15.6 million will be divided by
Alabama, Connecticut, the District of Columbia, Florida, Georgia,
Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts,
Michigan, New Hampshire, New Jersey, New York, North Carolina,
Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee,
Vermont, Virginia and West Virginia.

The company will also pay $800,000 for investigative costs and
other fees and agreed to sign a corporate integrity agreement with
federal authorities.

"Switching medication from tablets to capsules might seem
harmless, but when that is done solely to increase profit and in
violation of federal and state regulations that are designed to
protect patients, pharmacies must know that they are subjecting
themselves to the possibility of triple damages, civil penalties
and attorney fees," U.S Attorney Patrick Fitzgerald said in a
statement.

CVS, which has about 6,200 stores, said the settlement would not
affect its 2008 earnings.

Shares rose $1.31, or 3.5 percent, to $38.83 in afternoon
trading Tuesday.