CVS/pharmacy today announced agreements with the U.S. Drug Enforcement Administration (DEA) and the U.S. Attorneys' Offices for the Central District of California and the District of Nevada to settle allegations that in 2007 and 2008 certain CVS/pharmacy stores in California and Nevada engaged in unlawful sales of pseudoephedrine (PSE), an ingredient found in popular over-the-counter cold and cough medicines.
Pursuant to a non-prosecution agreement and civil settlement, CVS/pharmacy has agreed to pay the government $75 million in civil penalties and $2.6 million in profit forfeitures and to maintain certain compliance measures to monitor and prevent excessive sales of PSE. The settlement, which also acknowledges that a distribution center in California failed to monitor and report excessive PSE sales by CVS/pharmacy stores, relates only to the retail pharmacy business.
The settlement relates to excessive sales of PSE at certain CVS/pharmacy locations that resulted from the flawed implementation of an electronic monitoring system to record individual PSE sales. As implemented in California, Nevada and certain other states, the system did not prevent multiple sales of PSE that totaled more than the federal daily legal limit, which made certain CVS/pharmacy stores vulnerable to criminals who intended to purchase large amounts of PSE. The excessive sales occurred primarily in California and Nevada. The settlement includes not only federal jurisdictions in California and Nevada, but also federal jurisdictions in twenty-three other states where the system was not implemented properly.
The settlement does not impact any other business conducted by CVS Caremark or any of its affiliated companies. In addition, the settlement amount has been fully reserved, as previously disclosed, and should have no further effect on the company's financial results.
"We are announcing today that we have resolved this issue, which unfortunately resulted from a breakdown in CVS/pharmacy's normally high management and oversight standards," said Thomas M. Ryan, Chairman and CEO, CVS Caremark. "While this lapse occurred in 2007 and 2008 and has been addressed, it was an unacceptable breach of the company's policies and was totally inconsistent with our values. CVS/pharmacy is unwavering in its support of the measures taken by the federal government and the states to prevent drug abuse.
"To make certain this kind of lapse never takes place again," Ryan continued, "we have strengthened our internal controls and compliance measures and made substantial investments to improve our handling and monitoring of PSE by implementing enhanced technology and making other improvements in our stores and distribution centers."
Ryan concluded, "CVS/pharmacy will continue to cooperate fully with the DEA and other law enforcement agencies in their efforts to keep PSE out of the wrong hands."