Article: Drug firm settles in state probe

Madigan investigation of restocking still on

By John Chase
Tribune staff reporter
Published January 22, 2006, Chicago Tribune

One of the nation's largest pharmaceutical mail-order companies agreed to pay $500,000 to settle a state regulatory investigation into its practice of restocking unopened prescription drugs, Illinois officials confirmed Friday.

The July 2005 settlement with the Illinois Department of Financial and Professional Regulation was revealed as agency officials also confirmed they provided information about their investigation to the FBI last summer. Susan Hofer, a spokeswoman for the state agency, said she could not provide any details about the FBI probe.

Caremark spokesman Robert Mead said Friday the company was unaware of any FBI probe "into its business practices." Mead said the firm would "disclose all matters of investigation as it's appropriate."

The company confirmed the settlement, which did not assign blame, but declined further comment.

The developments come more than a year after the Tribune revealed Atty. Gen. Lisa Madigan's office had launched an investigation into whether Caremark routinely and illegally sold drugs that had been returned by other customers. That investigation is ongoing, sources close to the investigation said.

At the time, Caremark handled mail-order prescriptions for tens of thousands of Illinois residents, including state, Cook County and City of Chicago government employees. Caremark has since lost that contract for state employees, but it still handles prescriptions for more than 25,000 county employees as well as 50,000 current and former city employees.

The company sells so-called maintenance drugs, medicines that must be taken regularly by patients with chronic conditions such as high cholesterol, diabetes or allergies.

The Department of Financial and Professional Regulation, which oversees state licensing of pharmacies, argued that prior to June 2003 Caremark restocked "certain unopened prescription drugs in sealed containers that were returned" to Caremark's mail order facilities. Those facilities were located in Florida, Texas and suburban Mt. Prospect.

Caremark said the restocking procedure did not violate Illinois law but still changed the policy after June 2003, according to the agreement.

Illinois officials have said reselling prescription drugs is allowed under very limited circumstances, typically when the drugs have not left the supervision of trained medical staffers, because the products may be tampered with or damaged.

Caremark agreed to pay the $500,000 toward the costs of the state investigation and monitoring of compliance with the agreement, according to the settlement. Hofer said it is common for the department to forward information to law enforcement after investigations.

"We did refer our findings to the attorney general's office, and the department cooperated with the FBI," Hofer said.

Officials with the FBI did not return a phone call seeking comment.

The deal between Caremark and the department was signed in July but never announced by the department or Caremark, Hofer said, because agreements in which no blame is assigned are not typically made public. The department agreed to release the settlement only if someone asked for it, which the Tribune did on Friday.

A Chicago attorney handling two lawsuits against Caremark in Florida and California alleging similar practices said the settlement should have been disclosed earlier.

"In light of what Caremark's public pronouncements have been, that they have done nothing wrong, this settlement undercuts what they have been telling everybody," Michael Leonard said.