FTC: CVS Caremark to reimburse $5M to customers

Posted Jan. 13, 2012, at 8:13 a.m.

WASHINGTON — CVS Caremark has agreed to pay $5 million to reimburse some CVS and Walgreens customers who were allegedly misled about the prices of certain prescription drugs covered by Medicare, the Federal Trade Commission said Thursday.

The FTC alleged that one of CVS Caremark’s Medicare plans, RxAmerica, posted deceptively low prices on the websites that consumers use to shop for Medicare prescription drug plans. In some cases, the prices charged were 10 times higher than the ones posted.

As a result, consumers reached the “doughnut hole” sooner than they expected, meaning they had to start paying the full cost of prescriptions out of their own pockets because they had hit the limit on the government’s coverage. The term “doughnut hole” is used because once consumers spend a certain amount on their own, Medicare contributes again to the cost of the drugs.

The FTC charged that the mispriced drugs were bought by RxAmerica beneficiaries at CVS and Walgreens pharmacies from 2007 through at least November 2008. The inaccurate prices were posted on several websites, including one run by the Center for Medicare & Medicaid Services, which has a tool that enables people to calculate estimated drug-plan costs and figure out which one will help them avoid the doughnut hole for the longest period.

In a statement, CVS Caremark said it “inadvertently” posted inaccurate information for certain generic drugs on the government’s site. Neither the company nor the FTC provided a full listing of the affected drugs, although the FTC cited a few examples.

For instance, RxAmerica posted the price of a generic drug called gabapentin as $26.83. But the actual price of the drug, used to treat epilepsy seizures, was $257.70, the FTC said. The price of megestrol, a generic drug used to treat breast cancer symptoms, was posted at $55.68, but RxAmerica was paying more than five times that amount. Consumers paid their copayments and were probably unaware of the difference.

CVS Caremark said the pricing issues took place before it acquired RxAmerica in October 2008. The timeline provided by the FTC suggests that most, but not all, of the alleged deceptive pricing practices occurred before the acquisition.

The FTC declined to comment on how many consumers may be affected. CVS America describes itself as the nation’s largest manager of pharmacy benefits managers with access to about 65,000 pharmacies, including more than 7,300 CVS pharmacies.

The settlement has yet to be finalized.

But the FTC has closed a two-year, non-public investigation into whether CVS Caremark has engaged in anti-competitive or unfair business practices, the agency said Thursday.

“The commission has determined not to take any additional action at this time,” FTC Secretary Donald Clark wrote in a letter earlier this month to CVS Caremark’s attorney. “This action is not to be construed as a determination that a violation may not have occurred. . . . The commission reserves the right to take such further action as the public interest may require.”

Several labor unions, consumer groups and congressional lawmakers had raised concerns related to the merger of CVS and Caremark in 2007.

The critics charged that the combined company switched patients to drugs that were more profitable for CVS Caremark and misused consumer information. They alleged that the company notified CVS pharmacies when their customers patronized other pharmacies.

In a statement Thursday, Douglas Sgarro, the company’s chief legal officer, said that the company provided the government with millions of documents and access to many company executives.

“It is important to note that, at the conclusion of this comprehensive investigation, the FTC made no allegations of antitrust law violations or anti-competitive behavior associated with any of our business practices, products or service offerings,” Sgarro said.

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