Attorneys said the nation's largest pharmacy chain gave Medicaid patients capsules of Ranitidine (ruh-NIT'-eh-deen), a generic version of the heartburn medication Zantac, instead of even less expensive tablets. Both generic versions of the medication have the same active ingredient.
Authorities said the switch is illegal and allowed the company to charge state Medicaid programs more than four times as much for each pill, leading to a bigger profit.
"The Medicaid program is an important part of the medical safety net for our neediest citizens," Massachusetts Attorney General Martha Coakley said in a statement. "In today's economic climate, the state must account for every penny spent."
But Woonsocket, R.I-based CVS, which admitted no wrongdoing in the case, said money had nothing to do with its dispensing decisions.
"For many years, the company purchased and stocked the capsule form of Ranitidine across its chain of retail stores for dispensing to all patients, not just Medicaid recipients, due to the fact that the acquisition cost of capsules was lower than the cost of tablets," executives said in a statement.
Still, the two versions of the medication are technically considered different drugs, said Michael Behn, a Chicago lawyer who represented the whistleblower in the case.
"Legally, switching tablets for capsules is the same as switching Zantac for Prozac," he said. "A prescription for a tablet is not a scrip for the capsule, just as a price for the tablet is not the price for the capsule."
CVS will pay the federal government about $21 million as part of the settlement. The remaining $15.6 million will be divided by Alabama, Connecticut, the District of Columbia, Florida, Georgia, Illinois, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, Rhode Island, South Carolina, Tennessee, Vermont, Virginia and West Virginia.
The company will also pay $800,000 for investigative costs and other fees and agreed to sign a corporate integrity agreement with federal authorities.
"Switching medication from tablets to capsules might seem harmless, but when that is done solely to increase profit and in violation of federal and state regulations that are designed to protect patients, pharmacies must know that they are subjecting themselves to the possibility of triple damages, civil penalties and attorney fees," U.S Attorney Patrick Fitzgerald said in a statement.
CVS, which has about 6,200 stores, said the settlement would not affect its 2008 earnings.
Shares rose $1.73, or 4.6 percent, to close at $39.25 Tuesday.
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On the Net: www.cvs.com www.pharmacyfraudsettlement.com