CVS will pay $38M to settle drug-switching claims

CVS Caremark Corp. last week agreed to pay $37.8 million to the U.S. government and states including Rhode Island, Massachusetts and Connecticut, to settle Medicaid drug-switching claims related to its handling of ranitidine, the generic form of the heartburn medicine Zantac.
The settlement concludes investigations by the U.S. Department of Justice and 23 states into the CVS/pharmacy division’s “practice … of dispensing the generic drug ranitidine in capsule rather than tablet form to Medicaid recipients,” the parent company said in a statement last week. “The company has expressly denied engaging in any wrongful conduct,” it emphasized.
The retailer “agreed to the settlement in order to defray the distraction, burden and expense of continuing litigation,” CVS Caremark said, adding that “the government has been engaged in an investigation of the dispensing practices of various pharmacies related to ranitidine for many years.”
“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,” CVS Caremark said.
“At various times, certain state Medicaid programs reimbursed pharmacies at a higher rate for capsules than for tablets. Both of these dosage forms for ranitidine contain the same active ingredients.
“The government alleged that the practice of dispensing capsules instead of tablets was motivated by a desire to increase Medicaid reimbursement. The company has expressly denied this allegation.”
But a complaint filed in federal court in Chicago, by 23 states, the District of Columbia and the U.S. government, charged that substituting capsules for tablets was illegal. In some cases, the complaint alleged, the change allowed the company to charge state programs four times as much for each pill.
“Switching medication from tablets to capsules might seem harmless,” Patrick Fitzgerald, U.S. attorney for the Northern District of Illinois, said in a statement last week. “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.”
“The Medicaid program is an important part of the medical safety net for our neediest citizens,” added Mass. Attorney General Martha Coakley. “In today’s economic climate, the state must account for every penny.”
The settlement announced last week “calls for payment by the company of $36.7 million, plus approximately $800,000 in investigative costs and other fees,” for a total of about $37.5 million, CVS Caremark said. Illinois pharmacist Bernard Lisitza, who filed the initial complaint in 2003, will receive $4.3 million, Bloomberg News reported. &#8226