CVS Caremark: FTC Investigating Company's Business Practices
By Dinah Wisenberg Brin, Of DOW JONES NEWSWIRES
The Federal Trade Commission notified CVS Caremark Corp. (CVS) in August that
it is conducting a nonpublic investigation into some of the company's business
practices, the pharmacy concern disclosed Thursday.
CVS Caremark has come under criticism from various groups and lawmakers who
have asked the FTC to review the nearly $27 billion merger of a major drug-store
chain and large pharmacy benefits manager that formed the company in March 2007.
"The company is cooperating in the FTC's investigation and is voluntarily
producing documents and other information on a rolling basis as requested by the
FTC," CVS Caremark said in a filing with the Securities and Exchange Commission.
The company "remains confident that its business practices and service
offerings, which are designed to reduce health-care costs and expand consumer
choice, are being conducted in compliance with the antitrust laws," the filing
said.
CVS Caremark didn't elaborate on which practices are under review and had no
comment beyond the filing.
An FTC spokesman said he could only confirm what CVS disclosed.
In June, the FTC said it was referring to its Bureau of Competition a national
independent pharmacists group's concerns that CVS Caremark's pharmacy-benefits-
management operation, or PBM, had improperly shared patient information with the
company's retail side to steer customers to CVS stores, to the detriment of
competitors and customers.
The National Community Pharmacists Association called on the FTC to reopen the
CVS Caremark merger, claiming the company engaged in anticompetitive behavior.
State legislators and members of Congress this year also asked the FTC for a
review.
In May, the National Legislative Association on Prescription Drug Prices, a
nonprofit directed by state legislators, encouraged the FTC to open an
investigation into CVS's acquisition of Caremark Rx "and the activities and
conduct of the firm since the merger." The legislative group said CVS Caremark's
conduct threatens to harm consumers by increasing prices and decreasing service
and convenience.
While community pharmacists and lawmakers voice concerns that CVS Caremark has
improperly wielded its power as a combined drug retailer and PBM, the company
has had trouble keeping and winning PBM clients, a situation made clear Thursday
as Chief Executive Tom Ryan said the company had some "big client losses" for
2010.
The client news sent CVS shares down nearly 21%, or $7.50, to $28.65, and left
some Wall Street analysts questioning the company's retail-PBM business model.
-By Dinah Wisenberg Brin, Dow Jones Newswires; 215-656-8285; dinah.brin@
dowjones.com
(Kelly Nolan contributed to this report.)
(END) Dow Jones Newswires
11-05-091544ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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