CVS Caremark announces settlement of PSE sales suit

WOONSOCKET, R.I. Under a settlement reached with the Drug Enforcement Administration and the U.S. Attorneys' Offices for the Central District of California and the District of Nevada, CVS Caremark has agreed to pay $75 million in civil penalties and $2.6 million in profit forfeitures to settle allegations that in 2007 and 2008, certain CVS/pharmacy stores in California and Nevada engaged in unlawful sales of pseudoephedrine.

CVS also must maintain certain compliance measures to monitor and prevent excessive sales of the ingredient found in popular over-the-counter cold-cough medicines. In addition, the settlement acknowledged that a distribution center in California failed to monitor and report excessive PSE sales by CVS/pharmacy stores; it related only to the retail pharmacy business.

"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," stated Tom Ryan, chairman and CEO of 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."

The settlement does not impact any other business conducted by CVS 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, the company stated.

The settlement related 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 23 other states where the system was not implemented properly, CVS stated.

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