Oregon Department of Justice

Attorney General Ellen F. Rosenblum

Oregon Department of Justice - Attorney General Ellen F. Rosenblum
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February 14, 2008

Caremark agrees to reform its business practices and pay $38.5 million

Attorney General Hardy Myers today filed a Stipulated General Judgment in Marion County Circuit Court settling a complaint also filed today against Caremark Rx, L.L.C. (Caremark), one of the nation's largest pharmacy benefits management (PBM) companies, and two of its subsidiaries, Caremark, L.L.C., and Caremark PCS, L.L.C. (formerly Advance PCS).

PBMs typically enter into contracts with employers and government health plans to process prescription drug claims for medications provided to patients enrolled in the health plan. The companies are able to negotiate with drug companies to obtain volume discounts and discounts with participating retail pharmacies to provide dispensing services. In addition, retail pharmacies can dispense drugs to patients through PBM-owned mail order pharmacies. In the thirty years since the first PBMs appeared, their services have evolved to include complex rebate programs, pharmacy networks, and drug utilization reviews.

The complaint alleged that Caremark engaged in deceptive business practices by encouraging doctors to switch patients' prescriptions while representing that the patients and/or health plans would save money. Investigations revealed that doctors were not adequately informed of the costs associated with this practice and Caremark did not inform their client plans that rebates accrued from the drug switching process would be retained by Caremark and not passed directly to the client plan. The complaint further alleged that Caremark restocked and re-shipped previously dispensed drugs that had been returned to Caremark's mail order pharmacies.

"This is the second major settlement with a nationwide pharmacy benefit management company," Myers said. "We're hopeful that the 2004 judgment against another PBM, Medco, followed by today's Caremark agreement will encourage other PBMs to change their business practices in order to avoid similar actions taken against them."

The settlement generally prohibits Caremark from soliciting drug switches when:

  • The net drug cost of the proposed drug exceeds the net drug cost of the originally prescribed drug;
  • The cost to the patient will be greater than the cost of the originally prescribed drug;
  • 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 patient was switched from a similar drug within the last two years.
  • The settlement requires Caremark to:
  • Inform patients and prescribers what effect a drug switch will have on a patient's co-payment;
  • Inform prescribers of Caremark's financial incentives for certain drug switches;
  • Inform prescribers of material differences in side effects or efficacy between prescribed drugs and proposed drugs;
  • Reimburse patients for out-of-pocket expenses for drug switch-related health care costs and notify patients and prescribers that such reimbursement is available;
  • Obtain express, verifiable authorization from the prescriber for all drug switches;
  • Inform patients that they may decline a drug switch and the conditions for receiving the originally prescribed drug;
  • Monitor the effects of drug switches on the health of patients;
  • Adopt a certain code of ethics and professional standards;
  • Refrain from making any claims of savings for a drug switch to patients or prescribers unless Caremark can substantiate the claim;
  • Refrain from restocking and reshipping returned drugs unless permitted by applicable law;
  • Inform prescribers that visits by Caremark's clinical consultants and promotional materials sent to prescribers are funded by pharmaceutical manufacturers, if that is the case.

In addition, Caremark and its subsidiaries are required to pay $38.5 million to Oregon and 28 other states and reimburse patients up to $2.5 million for incurring expenses related to certain switches between cholesterol-controlling drugs. Of the $38.5 million paid to the states, $22 million must be used to benefit low-income, disabled or elderly consumers of prescription medications; to promote lower drug costs for state residents; to educate consumers about the cost differences among medications; or for similar purposes. The $22 million will be divided among the states based on population; Oregon's share will be $434,000. The remaining $16.5 million will cover the costs the states incurred in litigating the case. As an active participant on the multi-state Executive Committee, Oregon's share for costs will be $1 million.

Consumers wanting more information on this case and consumer protection in Oregon may call the Attorney General's consumer hotline at (503) 378-4320 (Salem area only), (503) 229-5576 (Portland area only) or toll-free at 1-877-877-9392. DOJ is online at www.doj.state.or.us


Jan Margosian, (503) 947-4333 (media line only) jan.margosian@doj.state.or.us |
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