Rite Aid 2013 Annual Report Download - page 110

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RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended March 2, 2013, March 3, 2012 and February 26, 2011
(In thousands, except per share amounts)
18. Commitments, Contingencies and Guarantees (Continued)
The Company is in discussions with the California regulators and has recorded an estimated amount to
settle these matters.
The Company was served with a Civil Investigative Demand Subpoena Duces Tecum dated
August 26, 2011 by the United States Attorney’s Office for the Eastern District of Michigan. The
subpoena requests records regarding Rite Aid’s Rx Savings Program and the reporting of usual and
customary charges to publicly funded health programs. In connection with the same investigation, the
Company was served with a Civil Subpoena Duces Tecum dated February 22, 2013 by the State of
Indiana Office of the Attorney General. The Company is completing its response to both of the
subpoenas and is unable to predict the timing or outcome of any review by the government of such
information.
In addition to the above described matters, the Company is subject from time to time to various
claims and lawsuits and governmental investigations arising in the ordinary course of our business.
While the Company’s management cannot predict the outcome of any of the claims, the Company’s
management does not believe that the outcome of any of these legal matters will be material to the
Company’s consolidated financial position. It is possible, however, that the Company’s results of
operations or cash flows in a particular fiscal period could be materially affected by an unfavorable
resolution of pending litigation or contingencies.
Contingencies
The California Department of Health Care Services (‘‘DHCS’’), the agency responsible for
administering the State of California Medicaid program, implemented retroactive reimbursement rate
reductions effective June 1, 2011, impacting the medical provider community in California, including
pharmacies. Numerous medical providers, including representatives of both chain and independent
pharmacies, filed suits against DHCS in federal district court in California and obtained preliminary
injunctions against the rate cuts, subject to a trial on the merits. DHCS has appealed the preliminary
injunctions to the Ninth Circuit Court of Appeals, which Court vacated the injunctions. The numerous
medical providers are considering their options. Based upon the actions of DHCS, the Company has
recorded an appropriate accrual. As pertinent facts and circumstances develop, this accrual may be
adjusted.
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