Rite Aid 2015 Annual Report Download - page 116

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RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended February 28, 2015, March 1, 2014 and March 2, 2013
(In thousands, except per share amounts)
19. Commitments, Contingencies and Guarantees (Continued)
The Company was served with a Civil Investigative Demand (‘‘CID’’) dated June 21, 2013 by the
USAO for the Eastern District of California and the Attorney General’s Office of the State of
California (the ‘‘AG’’). The CID requests records and responses to interrogatories regarding Rite Aid’s
Drug Utilization Review and prescription dispensing protocol and the dispensing of drugs designated
‘‘Code 1’’ by the State of California. The Company is in the process of producing responsive documents
and interrogatory responses to the USAO and AG 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 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 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 appealed the preliminary
injunctions to the Ninth Circuit Court of Appeals, which Court vacated the injunctions. Based upon the
actions of DHCS and the decision of the Appeals Court, the Company recorded an appropriate
accrual. In January 2014, the Center for Medicare and Medicaid Services approved a state plan
amendment that excluded certain drugs from the retroactive reimbursement rate reductions effective
March 31, 2012. Accordingly, the Company adjusted its accrual to take into account this exclusion at
year end. As pertinent facts and circumstances develop, this accrual may be adjusted further.
116