CVS to pay $37 million in fraud case

CVS Caremark Corp. agreed to pay almost $37 million to nearly two dozen states and the federal government to settle claims that the nation's largest pharmacy chain billed Medicaid programs for a more expensive formulation of an antacid, authorities said Tuesday.

The settlement in the case -- the first of its kind for a retail pharmacy company -- came after a lengthy investigation that began in 2001, when a suburban Chicago pharmacist alerted authorities.

Attorneys said CVS gave Medicaid patients capsules of Ranitidine, a generic version of the heartburn medication Zantac, instead of even less expensive tablets. Both generic versions of the medication have the same active ingredient.

Authorities said the switch is illegal and allowed the company to charge state Medicaid programs more than four times as much for each pill, leading to a bigger profit.

But Woonsocket, R.I-based CVS, which admitted no wrongdoing in the case, said money had nothing to do with its dispensing decisions.

"For many years, the company purchased and stocked the capsule form of Ranitidine across its chain of retail stores for dispensing to all patients, not just Medicaid recipients, due to the fact that the acquisition cost of capsules was lower than the cost of tablets," executives said in a statement.

Still, the two versions of the medication are technically considered different drugs, said Michael Behn, a Chicago lawyer who represented the whistleblower in the case.

"Switching medication from tablets to capsules might seem harmless, but when that is done solely to increase profit and in violation of federal and state regulations that are designed to protect patients, pharmacies must know that they are subjecting themselves to the possibility of triple damages, civil penalties and attorney fees," U.S. Attorney Patrick Fitzgerald said in a statement.

CVS will pay the federal government about $21 million as part of the settlement. The remaining $15.6 million will be divided by 23 states, including Illinois, and the District of Columbia.

The company will also pay $800,000 for investigative costs and other fees and agreed to sign a corporate integrity agreement with federal authorities.