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WOONSOCKET, R.I. (Reuters)—CVS Caremark Corp. has been the subject of a U.S. Federal Trade Commission investigation over some of its business practices since August, the company said Thursday.
Various groups have asked the government to look into CVS Caremark's practices since drugstore chain CVS bought pharmacy benefits management business Caremark Rx Inc. in March 2007.
They claim that changes to services in the pharmacy benefits business since the acquisition have led to higher prices, compromised quality of care and pushed patients to choose CVS drugstores over other pharmacies.
"We were recently notified by the FTC that it's conducting a nonpublic investigation relating to certain of our business practices," Chief Financial Officer Dave Rickard told Reuters during a telephone interview. Mr. Rickard did not provide details about the subject of the investigation.
The company also said that the attorney general of Texas issued two civil investigative demands in October relating to the processing of Medicaid and other government agency claims.
The investigation announcements came hours after CVS said that its pharmacy benefits business lost billions of dollars of business heading into 2010. Its shares fell as much as 24.3%.
In September, labor consortium Change to Win asked the FTC to re-examine the merger, saying the deal has led to higher drug prices. Two weeks later, eight U.S. congressmen asked the FTC to reopen its investigation into the deal, accusing CVS of using Caremark data on consumers to steer them to its drugstores.
CVS said it is confident that it is conducting its business in compliance with antitrust laws. It said its practices and the services it offers are designed to cut health care costs and expand choices for consumers.
Special interest groups, Mr. Rickard said, have "repeated their unfounded accusations so often that the commission has understandably decided that it should look into these allegations about our practices. We have nothing to hide and we're cooperating fully with the commission's inquiries."
FTC spokeswoman Claudia Bourne Farrell confirmed there is an investigation, but declined to discuss the matter further.
The National Community Pharmacists Assn. had also voiced its concerns in Washington. The group's chief executive officer, Bruce Roberts, commended the FTC for launching the investigation.
"Patients consistently complain of higher prices, fewer choices and privacy violations," Mr. Roberts said in a statement, adding "meaningful competition has been severely diminished."
Shares of CVS closed down $7.28 to $28.87. The shares are now worth about 13% less then they were when Caremark shareholders approved the CVS deal.