Suit accuses Caremark of improprieties

Friday, 11/21/03
By Keith Russell
Staff Writer

Two Caremark Rx Inc. employees are accusing their Nashville-based employer of fraudulently reshipping prescription drug orders that were returned to the company, without testing the medications for possible tampering or paying back clients who were first sent the prescriptions.

The employees further allege that the company stamps false dates on drug orders to meet performance targets in a contract to manage pharmacy benefits for the state of Florida.

Caremark issued a statement yesterday ''strenuously'' denying the allegations, which are made in a whistleblower lawsuit filed in Florida under that state's False Claims Act.

The company also defended the safety of its prescriptions and said it would welcome an audit of its services by the state of Florida.

''We stand behind our business practices and remain committed to the state of Florida and its employees,'' Caremark spokesman Gerard Carney said.

Caremark is one of the nation's largest pharmacy benefit management companies, with annual revenues of nearly $8 billion. The company, which is in the process of moving its headquarters from Birmingham, Ala., to Nashville, serves as an intermediary negotiating discounts with drug manufacturers on behalf of large employers and health plans. It then distributes the medications to health-plan enrollees, primarily through mail-order pharmacies throughout the country.

At the center of the allegations against the company are Michael and Peppi Fowler, a married couple who both work at Caremark's mail-order pharmacy and distribution center in Fort Lauderdale, Fla.

According to their attorney, Michael Leonard, the couple first filed their ''qui tam,'' or whistleblower, lawsuit in January. The case was under court seal until an amended complaint was filed yesterday in Tallahassee, Fla.

The lawsuit, a copy of which was obtained by The Tennessean, was filed on behalf of the state of Florida, which signed a four-year contract with Caremark in August 2000 to have the company manage pharmacy benefits for more than 200,000 government employees, retirees and dependents insured by the state health plan.

Specifically, the suit claims that Caremark improperly restocked and reshipped prescription orders that were returned to the company's distribution facility. The suit says the Fort Lauderdale facility received returns on a daily basis for a variety of reasons it was the wrong medication, for example, or went to the wrong address or the prescription was erroneously placed by a doctor.

Rather than destroying the returned medications or testing them for possible tampering, the suit alleges that nonlicensed employees simply ''eyeballed'' them.

The ''possibly dangerous or adulterated drugs'' then had their original labels peeled off or steamed off with an iron before being shipped to another Caremark distribution facility in Mount Prospect, Ill., the lawsuit says. The drugs then allegedly were sold and shipped to other customers.

The suit further alleges that Caremark failed to reimburse the state of Florida and its employees for charges and co-payments for the drugs that were returned, unless plan members called to complain.

The Fowlers also say that Caremark officials routinely stamped false dates on prescription orders to meet performance targets in its Florida state contract. The contract required the company to process orders in a set number of days or face financial penalties.

Caremark called the lawsuit ''baseless'' and vowed to defend itself.

''We have reviewed the allegations and found them to be meritless and will defend ourselves accordingly,'' company spokesman Carney said.

Carney said the company was hesitant to ''try this case in the press'' and declined to discuss the Fowlers' specific allegations. He said, however, that Caremark welcomed an audit by state officials in Florida, which the company believes will show it is meeting the performance standards of its contract.

Officials with Florida's Department of Health referred questions to the state's Board of Pharmacy, which did not return phone calls yesterday.

The Fowlers' lawsuit seeks monetary compensation for the state of Florida and triple damages, which the couple's attorney Leonard estimates could exceed $100 million. The suit also seeks to grant the Fowlers 30% of any award, the maximum allowable under Florida's False Claims Act.

Leonard said he believed the case would raise concerns to Caremark customers outside of Florida because some of the returned medications allegedly were sent to out-of-state facilities.

''If I'm Caremark, I'd be worried about a much wider net being cast,'' Leonard said.

When asked by a reporter to describe Caremark's policy regarding returned medications, Carney replied, ''No product is ever restocked without a pharmacist's approval, so the efficacy and safety of Caremark's medications cannot be questioned.''

The lawsuit is the latest in a string of legal challenges for Caremark and the pharmacy benefit management industry in general.

The Fowlers' allegations partly mirror two other whistleblower lawsuits filed against New Jersey-based Medco Health Solutions, the nation's biggest pharmacy benefit management company. Besides allegations of improper date stamping, the suits allege that Medco violated safety rules at its pharmacy centers and pressured doctors to prescribe medications from certain manufacturers in return for large payments.

The Medco cases, which were filed under the federal False Claims Act, recently were joined by the U.S. Attorney's Office in Philadelphia, which for the past four years has been investigating the business practices of PBM companies, including Caremark and AdvancePCS, an Irving, Texas-based company that is scheduled to be acquired by Caremark in a $5-billion-plus deal. The merger would make Caremark the nation's second-largest pharmacy benefit management company, behind Medco, with annual revenues of roughly $23 billion.

Caremark and AdvancePCS were among four pharmacy benefit management companies sued last month by two independent pharmacies in Alabama. The suit, which is seeking class-action status, accuses the companies of price-fixing and forcing ''unconscionable'' reimbursement rates on community pharmacies.

Caremark has said the charges are without merit and ''fundamentally mischaracterize'' its business practices.


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