CVS 2011 Annual Report Download - page 75

CVS CAREMARK 73 2011 ANNUAL REPORT
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 trad-
ing 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 received a
subpoena dated February 28, 2011 from the SEC requesting,
among other corporate records, information relating to public
disclosures made by the Company in 2009 concerning its PBM
and Medicare Part D businesses and information concerning
ownership and transactions in the Company’s securities by cer-
tain officers of the Company. The Company received a related
subpoena dated September 20, 2011 from the SEC seeking,
among other things, additional information concerning secu-
rities transactions by certain employees of the Company and
public disclosures made by the Company during 2009. The
Company is cooperating with these requests for information
and is providing documents and other information to the SEC
as requested.
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-prescrip-
tion merchandise or discounts or coupons for non-prescrip-
tion 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 January 2012, the Company received a subpoena from
OIG requesting information about its Health Savings Pass
program, a prescription drug discount program for uninsured
or under insured individuals, in connection with an inves-
tigation of possible false or otherwise improper claims for
payment involving United States Department of Health and
Human Services programs. In February 2012, the Company
also received a civil investigative demand from the Office of
the Attorney General of the State of Texas requesting a copy
of information produced under this OIG subpoena and other
information related to prescription drug claims submitted by
our pharmacies to Texas Medicaid for reimbursement. The
Company will respond to these requests for information and
cooperate with each of these investigations. We cannot pre-
dict with certainty the timing or outcome of any review by the
applicable government agency of the requested information.
In addition to the legal matters described previously, the
Company is also a party to other legal proceedings and inqui-
ries 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 its business, financial condi-
tion and results of operations will not be materially adversely
affected, or that the Company 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 interpre-
tation or application of existing laws or regulations, as they may
relate to our business, the pharmacy services, retail pharmacy
or retail clinic industry or to the health care industry generally;
(iii) pending or future federal or state governmental investiga-
tions of our business or the pharmacy services, retail pharmacy
or retail clinic industry or of the health care industry generally;
(iv) institution of government 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 devel-
opments in other pending or future legal proceedings against
us or affecting the pharmacy services, retail pharmacy or retail
clinic industry or the health care industry generally.
14 SEGMENT REPORTING
The Company currently has three reportable segments:
Pharmacy Services, Retail Pharmacy and Corporate.
The Company evaluates its Pharmacy Services and Retail
Pharmacy segment performance based on net revenue,
gross profit and operating profit before the effect of certain
intersegment activities and charges. The Company evalu-
ates the performance of its Corporate segment based on
operating expenses before the effect of discontinued opera-
tions and certain intersegment activities and charges. See
Note 1 for a description of the Pharmacy Services, Retail
Pharmacy and Corporate segments and related significant
accounting policies.
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