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Caremark Settles Drug-Switching Charges

Company will pay millions to settle charges by 27 states

February 14, 2008

The settlement with Tennessee-based Caremark also requires the pharmacy benefit manager to change its business practices and implement numerous consumer protections.

“As a result of this settlement, Illinois health care consumers and their health plans can make sure that the prescription drugs they purchase are the most cost-effective options,” Madigan said. “In times of rising health care costs, pharmacy benefit managers must fulfill their role of negotiating the most affordable prescription drugs for consumers and their health plans.”

“This drug-switching scheme benefited the company at the expense of the Texans it purported to help,” Texas Attorney General Abbott said. “This settlement will help restore integrity to the process and better ensure that patients receive health care at a reasonable cost.”

As pharmacy benefit managers, Caremark and its subsidiaries, Caremark, L.L.C. and CaremarkPCS, L.L.C., contract with employers and government health plans to process prescription drug claims for patients enrolled in health plans. In this case, Caremark wrongly encouraged physicians to switch patients to different brand name cholesterol-controlling drugs, allegedly to save money for the patients and their health plans.

However, physicians were not adequately warned about the health effects of the switch and/or the actual costs of the switch.

Moreover, Caremark neglected to inform the health plans that valuable rebates from drug manufacturers would accrue to Caremark from the drug-switching scheme, and that the company would retain those rebates instead of passing them on to health plans.

Under the terms of the settlement, Caremark may not solicit drug switches when:

• the net drug cost of the proposed drug exceeds the net drug cost of the originally prescribed drug, or when the cost to the patient will be greater;

• the originally prescribed drug has a generic equivalent and the proposed drug does not;

• the originally prescribed drug’s patent is expected to expire within six months, or;

• the patent was switched from a similar drug within the past two years.

The settlement requires Caremark to inform patients and drug prescribers about the effect the switch will have on the patient’s co-payment, and what financial incentives Caremark will realize for initiating a drug switch.

Caremark must notify patients and prescribers that patients can be reimbursed for out-of-pocket expenses associated with drug-switching, and in addition, patients have the right to decline the drug switch.

Other allegations

Texas continues its litigation against Caremark in a separate civil Medicaid fraud-related case. In that case, which is on file in a San Antonio federal court, the company is accused of failing to reimburse Medicaid for prescription drug payments of prescription drugs for individuals who were insured by one of Caremark’s health plans.

The investigation unveiled a systematic effort by Caremark to allow Medicaid to pay for medications acquired by families who were dually covered by both Caremark and Medicaid, Abbott said. State and federal law require health benefit plans to reimburse Medicaid when a claim covered by insurance is paid for by Medicaid.

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