CVS Caremark Corp. to pay almost $37 million on retail dispensing practices for ranitidine

April 14, 2008

CVS Caremark has reached a settlement agrement with Department of Jutice to resolve an investigation into the practice of dispensing the generic ranitidine in capsule rather than tablet form

CVS Caremark Corp. has reached a settlement agreement with the U.S. Department of Justice and a number of state Attorneys General to resolve an investigation into its practice of dispensing the generic drug ranitidine in capsule rather than tablet form to Medicaid recipients. Pursuant to the settlement agreement, the company has expressly denied engaging in any wrongful conduct.The settlement calls for payment by the company of $36.7 million, plus approximately $800,000 in investigative costs and other fees.

The investigation commenced in 2001 and has been previously disclosed in the company's prior Securities and Exchange Commission filings. CVS issued a statement which said the following: "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."

This is the second major fine CVS has received this year. In February, CVS agreed to pay $40 million to settle an investigation over Caremark's practice of switching patients from generic to brand-name cholesterol-lowering drugs in order to obtain rebates from manufacturers.