business

CVS Caremark sued by Texas pharmacy owners

The drugstore giant formed by a 2007 merger faces allegations that it has an unfair competitive advantage and its marketing tactics violate consumer privacy rights.

By Pamela Lewis Dolan — Posted Oct. 21, 2010

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The latest fight against CVS Caremark by its competitors comes in a lawsuit filed by six independent pharmacy owners in Texas. The suit targets the company's alleged marketing tactics to physicians.

The plaintiffs, who are board members of American Pharmacies, a for-profit, member-owned pharmacy wholesale-buying group that is financing the lawsuit, claim that the 2007 merger between CVS Corp. and Caremark Rx created an unfair competitive environment with them and other competing pharmacies. The suit also claims CVS Caremark violated the privacy rights of its consumers by using data collected through its pharmacy benefit management division to market to doctors and patients.

The complaint says that through its PBM division, the company is able to mine information to identify physicians' prescribing practices as well as patient buying practices. With this information, the physicians are targeted to change their prescribing practices to include drugs that are favored by CVS Caremark, according to the suit (link).

Under terms of the merger agreement, the Federal Trade Commission required that the company maintain a "firewall" between its pharmacy and PBM businesses so that its competitors could conduct business on a level playing field. This suit and other complaints claim that the company either never established the firewall or intentionally circumvented it to create competitive gains over other pharmacies, including those owned by the plaintiffs in the Texas suit.

"The allegations made in the lawsuit largely mirror similar allegations made by the National Community Pharmacists Assn. and other well-funded independent pharmacy interest groups who have repeatedly mischaracterized CVS Caremark's business practices and made false allegations against the company," said Christine Cramer, director of public relations for CVS Caremark.

The FTC launched an investigation of CVS Caremark in fall 2009 at the urging of the NCPA. The organization said it had received several complaints that the merger of CVS and Caremark created conflicts of interest, and that the company was trying to steer business solely to its own stores. That investigation is ongoing. In May, the company acknowledged in an Securities and Exhange Commission filing that its business practices also were being probed by 24 states.

"We are confident that our business practices and service offerings, which are designed to reduce health care costs and expand consumer choice, are being conducted in compliance with applicable antitrust, privacy and other laws," Cramer said.

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