CVS 2010 Annual Report Download - page 74

Notes to Consolidated Financial Statements
required under the Fair Labor Standards Act (“FLSA”) and under certain state statutes. The lawsuits also seek other relief,
including liquidated damages, punitive damages, attorneys’ fees, costs and injunctive relief arising out of the state and federal
claims for overtime pay. Notice has been issued to over 13,000 current and former assistant store managers offering them the
opportunity to “opt in” to certain of the FLSA collective actions and over 1,900 have elected to participate in these lawsuits.
At this time, the Company is not able to predict the outcome of these cases, or the possible monetary exposure associated with
the lawsuits. The Company’s position, however, is that the lawsuits are without merit and that the cases should not be certified
as class or collective actions. The Company is vigorously defending these claims, but cannot predict with certainty the timing
or outcome of this matter.
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 has provided documents and other information in response to the subpoena and continues to engage in discus-
sions with the government about the subject matter of the subpoena. The Company cannot predict with certainty the timing or
outcome of any review by the government of such information.
In March 2010, the Company received a subpoena from the OIG requesting information about programs under which the Company
has offered customers remuneration conditioned upon the transfer of prescriptions for drugs or medications to our pharmacies
in the form of gift cards, cash, non-prescription merchandise or discounts or coupons for non-prescription merchandise. The
subpoena relates to an investigation of possible false or otherwise improper claims for payment under the Medicare and Medicaid
programs. The Company continues to respond to this request for information and has been producing responsive documents on
a rolling basis. We cannot predict with certainty the timing or outcome of any reviews 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 Corporation 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 allegations of, among other things, securities fraud, insider trading and breach
of fiduciary duties and further alleges that the Company was damaged by the purchase of stock at allegedly inflated prices under
its share repurchase program. In January 2011, both lawsuits were transferred to the United States District Court for the District
of New Hampshire. The Company believes these lawsuits are without merit and the Company plans to defend them vigorously.
The Company cannot predict the ultimate outcome of the legal matters disclosed previously. Management does not believe,
however, that the outcome of any of these legal matters will have a material adverse effect on the Company’s operating results
or financial condition.
The Company is also a party to other legal proceedings and inquiries arising in the normal course of its business, none of which
is expected to be material to the Company. The Company can give no assurance, however, that our business, financial condition
and results of operations will not be materially adversely affected, or that we will not be required to materially change our business
practices, based on: (i) future enactment of new health care or other laws or regulations; (ii) the interpretation or application of
existing laws or regulations, as they may relate to our business or the pharmacy services or retail industry; (iii) pending or future
federal or state governmental investigations of our business or the pharmacy services or retail industry; (iv) institution of govern-
ment enforcement actions against us; (v) adverse developments in any pending qui tam lawsuit against us, whether sealed or
unsealed, or in any future qui tam lawsuit that may be filed against us; or (vi) adverse developments in other pending or future
legal proceedings against us or affecting the pharmacy services or retail industry.
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CVS Caremark 2010 Annual Report