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2013 Annual Report
In a related matter, in December 2007, the Company received a document subpoena 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 adjudication platform of Caremark.
The Company has provided 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 this matter.
• Caremark was named in a putative class action lawsuit filed in October 2003 in Alabama state court by John
Lauriello, purportedly on behalf of participants in the 1999 settlement of various securities class action and
derivative lawsuits against Caremark and others. Other defendants include insurance companies that provided
coverage to Caremark with respect to the settled lawsuits. The Lauriello lawsuit seeks approximately $3.2 billion
in compensatory damages plus other non-specified damages based on allegations that the amount of insurance
coverage available for the settled lawsuits was misrepresented and suppressed. A similar lawsuit was filed in
November 2003 by Frank McArthur, also in Alabama state court, naming as defendants Caremark, several insur-
ance companies, attorneys and law firms involved in the 1999 settlement. This lawsuit was stayed as a later-filed
class action, but McArthur was subsequently allowed to intervene in the Lauriello action. Following the close of
class discovery, the trial court entered an Order on August 15, 2012 that granted the plaintiffs’ motion to certify a
class pursuant to Alabama Rule of civil Procedures 23(b)(3) but denied their request that the class also be certified
pursuant to Rule 23(b)(1). In addition, the August 15, 2012 Order appointed class representatives and class counsel.
The defendants’ appeal and plaintiffs’ cross-appeal are pending before the Alabama Supreme Court. The proceed-
ings in the trial court are stayed by statute pending a decision on the appeal and cross-appeal by the Alabama
Supreme Court.
• Various lawsuits have been filed alleging that Caremark has violated applicable antitrust laws in establishing and
maintaining retail pharmacy networks for client health plans. In August 2003, Bellevue Drug Co., Robert Schreiber,
Inc. d/b/a Burns Pharmacy and Rehn-Huerbinger Drug Co. d/b/a Parkway Drugs #4, together with Pharmacy
Freedom Fund and the National Community Pharmacists Association filed a putative class action against Caremark
in Pennsylvania federal court, seeking treble damages and injunctive relief. This case was initially sent to arbitration
based on the contract terms between the pharmacies and Caremark. In October 2003, two independent pharma-
cies, North Jackson Pharmacy, Inc. and C&C, Inc. d/b/a Big C Discount Drugs, Inc., filed a putative class action
complaint in Alabama federal court against Caremark and two PBM competitors, seeking treble damages and
injunctive relief. The North Jackson Pharmacy case against two of the Caremark entities named as defendants was
transferred to Illinois federal court, and the case against a separate Caremark entity was sent to arbitration based
on contract terms between the pharmacies and Caremark. The Bellevue arbitration was then stayed by the parties
pending developments in the North Jackson Pharmacy court case.
In August 2006, the Bellevue case and the North Jackson Pharmacy case were both transferred to Pennsylvania
federal court by the Judicial Panel on Multidistrict Litigation for coordinated and consolidated proceedings with
other cases before the panel, including cases against other PBMs. Caremark appealed the decision which vacated
an order compelling arbitration and staying the proceedings in the Bellevue case and, following the appeal, the
Court of Appeals reinstated the order compelling arbitration of the Bellevue case. Following remand, plaintiffs in the
Bellevue case sought dismissal of their complaint to permit an immediate appeal of the reinstated order compelling
arbitration and pursued an appeal to the Third Circuit Court of Appeals. In November 2012, the Third Circuit Court
reversed the district court ruling and directed the parties to proceed in federal court. Motions for class certification
in the coordinated cases within the multidistrict litigation, including the North Jackson Pharmacy case, remain
pending, and the court has permitted certain additional class discovery and briefing. The consolidated action is
now known as the In Re Pharmacy Benefit Managers Antitrust Litigation.