CVS 2009 Annual Report Download - page 71

Since March 2009, the Company has been named in a series of
eight putative collective or class action lawsuits filed in federal
courts in Connecticut, Florida, Massachusetts, New York and
Rhode Island, purportedly on behalf of current and former
assistant store managers working in the Company’s stores at
various locations outside California. The lawsuits allege that
the Company failed to pay overtime to assistant store managers
as required under the Fair Labor Standards Act and under
certain state statutes. The lawsuits also seek other relief, including
liquidated damages, attorneys’ fees, costs and injunctive relief
arising out of the state and federal claims for overtime pay.
At this time, the Company is not able to predict the outcome
of these lawsuits, or any possible monetary exposure associ-
ated with the lawsuits. The Company believes, however, that
the lawsuits are without merit and that the cases should not
be certified as class or collective actions, and is vigorously
defending these claims.
In January 2010, the Company received a subpoena from the
OIG in connection with an investigation of possible false or
otherwise improper claims for payment under the Medicare
and Medicaid programs. The subpoena requests retail pharmacy
claims data for “dual eligible” customers (i.e., customers with
both Medicaid and private insurance coverage), information
concerning the Company’s retail pharmacy claims processing
systems, copies of pharmacy payor contracts and other
documents and records. The Company is cooperating with
the request for information and intends to produce responsive
documents on a rolling basis. The Company cannot predict
with certainty the timing or outcome of any review by the
government of such information.
In November 2009, a securities class action lawsuit was filed in
the United States District Court for the District of Rhode Island
purportedly on behalf of purchasers of CVS Caremark Corpo-
ration stock between May 5, 2009 and November 4, 2009. The
lawsuit names the Company and certain officers as defendants
and includes allegations of securities fraud relating to public
disclosures made by the Company concerning the PBM business
and allegations of insider trading. In addition, a shareholder
derivative lawsuit was filed in December 2009, in the same
court against the directors and certain officers of the Company.
A derivative lawsuit is a lawsuit filed by a shareholder purporting
to assert claims on behalf of a corporation against directors
and officers of the corporation. This lawsuit includes allega-
tions of, among other things, securities fraud, insider trading
and breach of fiduciary duties and further alleges that the
cases within the multidistrict litigation, including the North
Jackson Pharmacy case, remain pending. The consolidated
action is now known as the In Re Pharmacy Benefit Managers
Antitrust Litigation.
Beginning in November 2008, the Company received and has
been responding to several subpoenas from the Drug Enforce-
ment Administration (“DEA”), Los Angeles Field Division,
requesting sales data and other information regarding the
Company’s distribution of products containing pseudoephed-
rine (“PSE”) at certain retail pharmacies and from one
California distribution center. In September 2009, the United
States Attorney’s Office for the Central District of California
(“USAO”) and the DEA commenced discussions with the
Company regarding whether, in late 2007 and 2008, the
Company distributed PSE in violation of the Controlled
Substances Act. Violations of the Controlled Substances Act
could result in the imposition of civil and/or criminal penal-
ties against the Company. In addition, the DEA has issued
an order to show cause against certain retail pharmacies and
the Company’s La Habra, California distribution center which
could result in administrative action against the Company’s
DEA registrations for these facilities. Discussions are under-
way to resolve these matters, but whether an agreement can
be reached and on what terms are uncertain.
In August 2009, the Company was notified by the Federal
Trade Commission (the “FTC”) that it is conducting a non-
public investigation under the Federal Trade Commission
Act into certain of the Company’s business practices. The
Company is cooperating in the FTC’s investigation and is
producing documents and other information on a rolling basis
as requested by the FTC. The Company is not able to predict
with certainty the timing or outcome of the investigation.
However, it 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.
In March 2009, the Company received a subpoena from the
OIG requesting information concerning the Medicare Part D
prescription drug plans of RxAmerica, the PBM subsidiary
of Longs Drug Stores Corporation which was acquired by the
Company in October 2008. The Company is cooperating with
the request for information and has been producing respon-
sive documents on a rolling basis. The Company cannot predict
with certainty the timing or outcome of any review by the
government of such information.
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