The settlement comes at a time of intensive government scrutiny of pharmacy benefit managers like CVS Caremark, which run prescription drug plans for employers and insurers. The F.T.C. is reviewing the proposed merger of the two main competitors to CVS Caremark: Medco Health and Express Scripts.
In the case of Medco and Express Scripts, regulators are examining whether the combination would create a player with too much market share.
With CVS Caremark, the agency looked into whether the merger of one of the largest drugstore chains with one of the largest pharmacy benefits managers had given the company an unfair market advantage in steering customers and obtaining information about competing pharmacies. CVS Caremark works with a network of about 65,000 pharmacies, including more than 7,300 of its own drugstores.
In 2009, some legislators, labor unions, pharmacies and consumer groups raised concerns about potentially anticompetitive and anticonsumer business practices by CVS Caremark. The F.T.C. opened an investigation early that year.
On Thursday, the agency dismissed the more serious allegations of anticompetitive behavior. The agency found only one violation — that one of the company’s Medicare drug plans, then called RxAmerica, misled some consumers about drug prices.
“After a thorough and comprehensive review of other consumer protection and competition issues in this matter, the F.T.C. issued a letter closing the investigation,” the agency said in a news release.
In a statement, CVS Caremark said that the settlement related only to the practices of RxAmerica, a subsidiary of Longs Drug Stores, that took place before CVS Caremark acquired Longs in October 2008. (While much of the incorrect pricing did occur before the purchase, the F.T.C. asserted that some continued after the acquisition.)
CVS Caremark said that the subsidiary had inadvertently posted inaccurate prices for certain generic drugs on a Web site maintained by the Centers for Medicare and Medicaid Services and that the company had rectified the pricing problem upon learning of it.
“CVS Caremark is pleased to have reached an agreement with the F.T.C. that ends the investigation and enables us to continue our focus on offering unique, innovative products and services that differentiate us and benefit consumers,” said Larry Merlo, the chief executive of CVS Caremark, in the statement.
This is not CVS Caremark’s first instance of incorrect pricing. In 2010, the company notified the Centers for Medicare and Medicaid Services that from October 2009 to January 2010, a computer error had caused it to provide incorrect prices — about 4 percent lower than the actual price — for brand-name prescription drugs available through its SilverScript Medicare drug plan. The company offered to refund the price difference to customers who had paid more than they had expected. It also offered to help them switch to another plan.
The F.T.C.’s decision in the current case removes a significant overhang for CVS Caremark. The company said it was currently in discussions with the attorneys general of 24 states and the District of Columbia to resolve a parallel multistate investigation.
In 2006, when CVS proposed to merge with Caremark, executives pledged that the new company would put up a firewall to keep the activities of its stores separate from the benefits manager, which processes prescriptions from competing pharmacies. Thomas M. Ryan, then CVS’s chief executive, said in a conference call with investors in 2006 that the merged company would “be agnostic to where the consumer fills their prescription.”
But pharmacies and consumer groups asserted in their complaints to regulators that the two divisions of the company had shared consumers’ records, steering people to the company’s retail stores and mail-order operations, which gave CVS Caremark an unfair advantage over competitors. At the time, some consumer advocates called for the merger to be dissolved.
The F.T.C. mounted a sweeping investigation, involving its bureau of consumer protection, bureau of economics and bureau of competition — an unusual effort by the agency. But it ultimately cited CVS Caremark for only the RxAmerica violation.
In the statement, Douglas A. Sgarro, the chief legal officer of CVS Caremark, said, “It is important to note that, at the conclusion of this comprehensive investigation, the F.T.C. made no allegations of antitrust law violations or anticompetitive behavior associated with any of our business practices, products or service offerings.”
Industry analysts said the settlement represented a victory for CVS Caremark and a repudiation of the merger’s critics.
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