CVS Investigation

CVS continues to run into problems. The company revealed that it is under investigation in 24 states because of its business practices. A primary focus of the investigation is whether CVS gave incentives for customers to transfer their prescriptions to CVS.

CVS Caremark Corp., the largest U.S. provider of prescription drugs, said its business practices are under investigation by 24 states.

The probe is similar to one that was started by the U.S. Federal Trade Commission last year, CVS said in a filing today. The District of Columbia and county of Los Angeles are also participating in the investigation, according to the filing. CVS said it’s cooperating with the investigations.

A multistate task force is reviewing the relationship and practices of CVS and Caremark following their 2007 merger, Connecticut Attorney General Richard Blumenthal said in March. The offices of the attorneys general of Illinois and Florida also confirmed in March that they were taking part in the investigation.

CVS also said it received a subpoena from the Office of Inspector General within the U.S. Department of Health and Human Services for information on incentives for customers to transfer their prescriptions to CVS’s pharmacies. Offers included gift cards, cash, non-prescription goods and coupons, according to the filing with the Securities and Exchange Commission.

Another Wrinkle in the CVS-Caremark Story

The Wall Street Journal had an article in yesterday's paper reporting another wrinkle in the CVS-Caremark story.

Coventry Health, which is moving more than $1 billion a year worth of pharmacy-benefits-management business from CVS Caremark to a rival PBM, accuses the company of wrongfully paying hundreds of thousands of dollars or more in prescription drug claims.

The Coventry Health account is one of several "big client losses" amounting to a net $4.8 billion in erased business for next year that CVS Caremark discussed with investors last week. While investors already knew about some of the lost accounts, including Coventry, there were more than expected, and CVS stock swooned on renewed concerns about the company's hybrid drug retailer-PBM business model.

In a breach-of-contract lawsuit filed against CVS Caremark in September and moved to a U.S. district in Tennessee last month, Coventry alleges that Caremark incorrectly paid numerous drug claims to Coventry members that it should have denied.