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For Immediate Release

Media Contact:
Raquel Guillory, 410-576-6357

Attorney General Gansler Leads Settlement of
Consumer Protection Claims Against Caremark

Company to Pay $41 Million as Part of Settlement

BALTIMORE, MD (February 14, 2008) - Attorney General Douglas F. Gansler announced today that he, along with Attorneys General from 27 other states and the District of Columbia, entered into a settlement of consumer protection claims against Caremark Rx, L.L.C., one of the nation’s largest pharmacy benefits management (PBM) companies.

As part of the settlement, Caremark will pay $38.5 million to the states and up to $2.5 million in reimbursement to patients who incurred expenses related to certain switches between cholesterol-controlling drugs. Twenty-two million of the amount paid to the States are funds that must be used to benefit low-income, disabled or elderly consumers of prescription medications, to promote lower drug costs for state residents, to educate consumers concerning the cost differences among medications, or for similar purposes.

PBMs enter into contracts with employers and health plans to process prescription drug claims for patients enrolled in the health plan; negotiate with drug companies to obtain volume discounts; negotiate discounts with participating retail pharmacies to provide dispensing services at a discount; and dispense drugs to patients through PBM-owned mail order pharmacies. In the 30 years since the first PBMs appeared, their services have evolved to include complex rebate programs, pharmacy networks, and drug utilization reviews.

Attorney General Gansler’s Consumer Protection Division today filed a consent order and complaint in the Circuit Court for Baltimore City against Caremark Rx, L.L.C. and two of its subsidiaries: Caremark, L.L.C. and CaremarkPCS, L.L.C. (formerly AdvancePCS). The complaint alleges that Caremark engaged in deceptive trade practices by encouraging doctors to switch patients from originally prescribed brand drugs to different brand name prescription drugs, representing that the patients and/or health plans would save money without adequately informing doctors of the actual effect this switch would have on costs to patients and health plans. Moreover, Caremark did not clearly inform their clients that money Caremark earned from the drug switching process would be retained by Caremark and not passed directly to the client plan. The complaint further alleges that Caremark restocked and re-shipped previously dispensed drugs that had been returned to Caremark’s mail order pharmacies.

“I am pleased that this settlement will ensure that consumers are not switched to costlier drugs when it is not in the best interest of consumers or their health plans,” said Attorney General Gansler. “As a result of this settlement, important information about drug switches will now be disclosed to consumers and their prescribing physicians.”

The settlement requires Caremark to significantly change its business practices, and generally prohibits Caremark from soliciting drug switches when:

  • The net cost of the proposed drug exceeds the net cost of the originally prescribed
  • The cost to the patient will be greater than the cost of the originally prescribed
  • The originally prescribed drug has a generic equivalent and the proposed drug
    does not;
  • The originally prescribed drug’s patent is expected to expire within six months; or
  • The patient was switched from a similar drug within the last two years.

The settlement requires Caremark to:

  • Inform patients and prescribers what effect a drug switch will have on a patient’s
  • Inform prescribers of Caremark’s financial incentives for certain drug switches;
  • Inform prescribers of material differences in side effects or efficacy between
    prescribed drugs and proposed drugs;
  • Reimburse patients for out-of-pocket expenses for drug switch-related health care
    costs and notify patients and prescribers that such reimbursement is available;
  • Obtain express, verifiable authorization from the prescriber for all drug switches;
  • Inform patients that they may decline a drug switch and the conditions for
    receiving the originally prescribed drug;
  • Monitor the effects of drug switches on the health of patients;
  • Adopt a certain code of ethics and professional standards;
  • Refrain from making any claims of savings for a drug switch to patients or
    prescribers unless Caremark can substantiate the claim;
  • Refrain from restocking and re-shipping returned drugs unless permitted by
    applicable law; and
  • Inform prescribers that visits by Caremark’s clinical consultants and promotional
    materials sent to prescribers are funded by pharmaceutical manufacturers, if that
    is the case.

The Attorneys General of Maryland and Illinois led the investigation into Caremark’s drug switching practices. The participating states in the settlement are: Arizona, Arkansas, California, Connecticut, Delaware, District of Columbia, Florida, Illinois, Iowa, Louisiana, Maryland, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nevada, New Mexico, North Carolina, Ohio, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Vermont, Virginia and Washington.

In making today’s announcement, Attorney General Gansler thanked Assistant Attorneys General Lauren Calia and Ellen Kuhn for their work on the case.


Attorney General of Maryland 1 (888) 743-0023 toll-free / TDD: (410) 576-6372
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