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Cvs Pharmacy
CVS Pharmacy
1 Introduction
On October 14, 2010, the United States Attorney’s Office for the Central District of California announced that CVS Pharmacy, Inc. was fined $77 million (including $75 million civil penalty and the forfeit of $2.5 million profit) for its unlawful sales of pseudoephedrine, a regulated drug, to criminals between September 2007 and November 2008. During that period, the company failed to comply with laws that limit the quantity of the drug sold to individual customers. The sales, according to the Attorney’s Office, directly caused an increase the production of methamphetamine in California. CVS Pharmacy, Inc (“CVS/pharmacy”) is the retail pharmacy subsidiary of CVS Caremark Corporation (hereinafter collectively referred to as “CVS”). In addition to retail pharmacy, CVS also runs pharmacy services, retail clinics, and mail-order pharmacy businesses. In fiscal year 2010, the company had net revenues of more than $96 billion and a net profit of more than $3 billion. Selected financial data by business segments (pharmacy services, retail pharmacy, and corporate) is shown in Exhibit 1. CVS was the 18th largest company on the Fortune 500 according to its 2010 annual report and CVS/pharmacy is one of the largest retail pharmacy chains in the United States. As of December 31, 2010, it operates more than 7,100 retail pharmacy stores in the United States. Exhibit 2 shows the number of CVS/pharmacy stores in each state (as of December 31, 2009). Today’s CVS (listed on New York Stock Exchange, ticker “CVS”, web site: http://www.cvs.com/) is the results of a series of mergers and acquisitions and expansion into new markets in the past few years. Major mergers and acquisitions during the past six years included Eckerd ($2.15 billion), Albertson 's ($4.0 billion), Caremark ($26.9 billion), and Longs Drugs ($2.6 billion). The markets in which CVS has presence also increased from 36 states in 2004 to 44 states in 2010. A



References: CVS Caremark Corporation. (2010). CVS/pharmacy Announces Agreements With U.S. Drug Enforcement Administration and U.S. Attorneys ' Offices Retrieved October 20, 2010, from http://phx.corporate-ir.net/phoenix.zhtml?c=99533&p=irolnewsArticle&ID=1482916&highlight= U.S. Department of Health & Human Services. (2009). CVS Pays $2.25 Million & Toughens Disposal Practices to Settle HIPAA Privacy Case Retrieved April 22, 2011, from http://www.hhs.gov/ocr/privacy/hipaa/enforcement/examples/cvsresolutionagreement.html U.S. Department of Justice. (2008). CVS Caremark Corp. To Pay $36.7 Million to United States, 23 States, and the District of Columbia To Settle Medicaid Prescription Drug Fraud Allegations. U.S. Department of Justice. (2011). CVS Pharmacy Inc. Agrees to Pay $17.5 Million to Resolve False Prescription Billing Case Retrieved April 22, 2011, from http://www.justice.gov/opa/pr/2011/April/11-civ-485.html U.S. Department of Justice Drug Enforcement Administration. (2006). Rules: Retail Sales of Scheduled Listed Chemical Products; Self- Certification of Regulated Sellers of Scheduled Listed Chemical Products Retrieved October 20, 2010, from http://www.deadiversion.usdoj.gov/fed_regs/rules/2006/fr0926.htm U.S. Department of Justice Drug Enforcement Administration. (2007). Procedures for Establishment of Individual Import, Manufacturing, and Procurement Quotas Assessment of Annual Needs Questions and Answers Retrieved October 20, 2010, from http://www.deadiversion.usdoj.gov/meth/q_a.htm U.S. Department of Justice National Drug Intelligence Center. (2009). Situation Report: Pseudoehpedrine Smurfing Fuels Surge in Large-Scale Methamphetamine Production in California. (2009-S0787007). United States Attorneys ' Office. (2010). Non-Prosecution Agreement between the United States Attorneys ' Offices for the Central District of California and the District of Nevada and CVS Pharmacy, Inc. United States Attorneys ' Office Central District of California. (2010). CVS Admits Illegally Selling Pseudoephedrine to Criminals Who Made Methamphetamine, Agrees to Pay $77.6 Million to Resolve Government Investigation Retrieved October 30, 2010, from http://www.justice.gov/usao/cac/pressroom/pr2010/148.html 11

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