CVS 2012 Annual Report Download - page 80

CVS CAREMARK 2012 ANNUAL REPORT
78
Notes to Consolidated Financial Statements
Our contingencies are subject to significant uncertainties, including, among other factors: (i) the procedural status of
pending matters; (ii) whether class action status is sought and certified; (iii) whether asserted claims or allegations will
survive dispositive motion practice; (iv) the extent of potential damages, fines or penalties, which are often unspecified or
indeterminate; (v) the impact of discovery on the legal process; (vi) whether novel or unsettled legal theories are at issue;
(vii) the settlement posture of the parties, and/or (viii) in the case of certain government agency investigations, whether a
sealed qui tam lawsuit (“whistleblower” action) has been filed and whether the government agency makes a decision to
intervene in the lawsuit following investigation.
Except as otherwise noted, the Company cannot predict with certainty the timing or outcome of the legal matters
described below, and is unable to reasonably estimate a possible loss or range of possible loss in excess of amounts
already accrued for these matters.
Caremark (the term “Caremark” being used herein to generally refer to any one or more pharmacy benefit management
subsidiaries of the Company, as applicable) is a defendant in a
qui tam lawsuit initially filed by a relator on behalf of various
state and federal government agencies in Texas federal court in 1999. The case was unsealed in May 2005. The case seeks
monetary damages and alleges that Caremark’s processing of Medicaid and certain other government claims on behalf of
its clients (which allegedly resulted in underpayments from our clients to the applicable government agencies) on one of
Caremark’s adjudication platforms violates applicable federal or state false claims acts and fraud statutes. The United
States and the States of Texas, Tennessee, Florida, Arkansas, Louisiana and California intervened in the lawsuit, but
Tennessee and Florida withdrew from the lawsuit in August 2006 and May 2007, respectively. Thereafter, in 2008, the
Company prevailed on several motions for partial summary judgment and, following an appellate ruling from the Fifth
Circuit Court of Appeals in 2011 which affirmed in part and reversed in part these prior rulings, the claims asserted in the
case against Caremark have been substantially narrowed. In December 2007, the Company received a document sub-
poena from the Office of Inspector General (“OIG”) within the U.S. Department of Health and Human Services (“HHS”),
requesting information relating to the processing of Medicaid and other government agency claims on a different adjudica-
tion platform of Caremark. The Company has been providing documents and other information in response to this request
for information. The Company has been conducting discussions with the United States Department of Justice (“DOJ”) and
the OIG regarding a possible settlement of these legal matters.
In April 2009, the State of Texas filed a purported civil enforcement action against Caremark for injunctive relief, damages
and civil penalties in Travis County, Texas alleging that Caremark violated the Texas Medicaid Fraud Prevention Act and
other state laws based on its processing of Texas Medicaid claims on behalf of PBM clients on one of Caremark’s adjudi-
cation platforms. In September 2011, the Company prevailed on a motion for partial summary judgment against the State
of Texas and narrowed the remaining claims in the lawsuit. In October 2009 and October 2010, the Company received civil
investigative demands from the Office of the Attorney General of the State of Texas requesting, respectively, information
produced under the OIG subpoena described above and other information related to the processing of Medicaid claims.
These civil investigative demands state that the Office of the Attorney General of the State of Texas is investigating
allegations currently pending under seal relating to two other adjudication platforms of Caremark. In January 2012, the
parties filed joint motion with the Texas federal and state courts requesting that the lawsuits with the State of Texas be
abated so that the parties can focus on completing settlement documentation relating to Caremark’s processing of Texas
Medicaid claims.