Friday, September 9, 2005
Caremark RX entered into a civil settlement with the Department of Justice regarding alleged illegal kickbacks at its AdvancePCS subsidiary. The company agreed to pay $137.5 million to resolve claims that it solicited kickbacks from drug manufacturers and secretly paid rebates to customers to contract with AdvancePCS, a pharmacy benefits manager (PBM). According to the a press release (here) issued by the U.S. Attorney's Office for the Eastern District of Pennsylvania:
The civil settlement resolves claims under the False Claims Act and the Public Contract Anti-Kickback Act arising from (1) payments made by pharmaceutical manufacturers to AdvancePCS in the form of excessive administrative fees and over-priced products and services agreements as an improper reward for favorable treatment of the manufacturers’ drugs in connection with the contracts between AdvancePCS and health care providers to the OPM, which administers benefits to federal employees and their dependents, and HHS with respect to Medicare Plus Choice organizations, (2) payments by pharmaceutical manufacturers of flat fee lump sum and flat fee percentage rebate contracts for heavily utilized drugs as an improper reward for favorable treatment of those drugs in connection with contracts between AdvancePCS and those who provide health care plans to OPM and HHS, and (3) payments made by AdvancePCS to customers and potential customers that contracted with federally-funded healthcare plans to ensure that AdvancePCS was selected or retained as the PBM for the healthcare plan.
While the government touted the settlement as "the first of its kind" against a PBM for undisclosed financial arrangements with pharmaceutical companies and purchasers of its services, Caremark RX had a bit of a different spin on the matter, as discussed in the company's press release (here):
In reaching the settlement, AdvancePCS expressly denied all allegations made against it and further denied that it had engaged in any wrongful or inappropriate conduct. The Government has agreed that the settlement agreement is not intended to be, and shall not be understood as, an admission of liability or wrongdoing by AdvancePCS. Further, the settlement agreement states that nothing "shall be interpreted or construed as an agreement or acknowledgement by AdvancePCS as to whether any pharmaceutical manufacturer, customer, or other entity which has, or previously has had, a contract with AdvancePCS has at any time engaged in any of the conduct alleged."