Attorney General's News Release

February 14, 2008

Nixon, 28 other Attorneys General reach settlement with Caremark; Missouri to receive $929,987 in payments and costs

Jefferson City, Mo. — Missouri will receive $929,987 in payments and costs as part of a nationwide settlement with Caremark Rx LLC, one of the nation’s largest pharmacy benefits management (PBM) companies, Attorney General Jay Nixon announced today. Missouri is one of 29 states to reach the $38.5 million agreement with the company, which resolves consumer complaints about the company’s drug switching program.

As part of the settlement, Caremark is required to significantly change its business practices so that patients and prescribers have more information about health care costs. In addition, the company will pay up to $2.5 million in reimbursement to patients who incurred expenses related to certain switches between cholesterol-controlling drugs.

The states must use $22 million of the $38.5 million they will receive to benefit low-income, disabled or elderly consumers of prescription medications, to promote lower drug costs for their residents, to educate consumers concerning the cost differences among medications, or for similar purposes. Nixon says Missouri will receive $629,987 for this purpose. The remaining $16.5 million Caremark will pay is for the states’ costs in investigating and bringing the case, with Missouri receiving $300,000.

Nixon filed the petition and final judgment in Cole County Circuit Court today against Caremark Rx LLC and two of its subsidiaries: Caremark LLC and CaremarkPCS LLC (formerly AdvancePCS). The settlement resolves the concerns of Nixon and the other Attorneys General that Caremark engaged in deceptive business practices by encouraging doctors to switch patients to different brand name prescription drugs while representing that the patients and/or health plans would save money.

“Doctors, however, were not adequately informed of the effect this switch would have on costs to patients and health plans,” Nixon said. “Moreover, Caremark did not clearly disclose to their client plans that money earned by Caremark accrued from the drug switching process would be retained by the company and not passed directly to the client plan. We are pleased that these policies will be addressed through this settlement.”

The settlement generally prohibits Caremark from soliciting drug switches when:

• The net drug cost of the proposed drug exceeds the net drug cost of the originally prescribed drug;
• The cost to the patient will be greater than the cost of the originally prescribed drug;
• 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 co-payment;
• Inform prescribers of Caremark’s financial incentives for certain drug switches;
• Inform prescribers of material differences in side effects of 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 effect of drug switches on the health of patients; and
• Adopt a certain code of ethics and professional standards.

PBMs enter into contracts with employers and governmental health plans to process prescription drug claims for drugs provided to 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 PBM appeared, their services have evolved to include complex rebate programs, pharmacy networks, and drug utilization reviews.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to Press Secretary John Fougere.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818