CVS Pharmacy, Inc. will pay a record $75 million in civil penalties after admitting that it sold pseudoephedrine, a key ingredient in the production of methamphetamine, to criminals in 25 states.
As part of the agreement with federal prosecutors, the nation's largest retail pharmacy chain has also agreed to forfeit $2.6 million in profits the company earned from the illegal sales.
The $75 million portion of the settlement represents the largest civil penalty ever paid under the Controlled Substances Act.
"This historic settlement underscores Drug Enforcement Administration's commitment to protect the public's health and safety against the scourge of methamphetamine," said Michele M. Leonhart, DEA acting administrator. "CVS's flagrant violation of the law resulted in the company becoming a direct link in the methamphetamine supply chain.
DEA will continue to work with its state and local counterparts to disrupt the supply of methamphetamine, including inhibiting access to chemicals, such as pseudoephedrine, used to produce methamphetamine."
The U.S. Attorneys Office in Los Angeles, CA, which led the investigation, said the sales occurred in CVS stores located primarily in Los Angeles County; Orange County, CA; and Clark County, NV.
Between September 2007 and November 2008, prosecutors said, CVS supplied large amounts of pseudoephedrine to methamphetamine traffickers in Southern California, and the company's illegal sales led directly to an increase in methamphetamine production in California.
CVS, a subsidiary of Woonsocket, RI-based CVS Caremark Corp., eventually changed its sales practices, but only after it became aware of the government's investigation.
"This case shows what happens when companies fail to follow their ethical and legal responsibilities," said U.S. Attorney André Birotte Jr.
"CVS knew it had a duty to prevent methamphetamine trafficking, but it failed to take steps to control the sale of a regulated drug used by methamphetamine cooks as an essential ingredient for their poisonous stew," Birotte said.
The investigation uncovered thousands of violations of the Combat Methamphetamine Epidemic Act of 2005, which limits the amount of pseudoephedrine that a customer can purchase in one day.
CVS blamed the multistate illegal sales on "an electronic monitoring system flaw that has been corrected," and said the previously disclosed settlement would have no further impact on its finances.
In 2007, CVS implemented an automated electronic logbook system to record pseudoephedrine sales, but the system did not prevent multiple purchases by an individual customer on the same day. The government learned that violations occurred in California and Nevada, and in 23 other states where CVS failed to implement appropriate safeguards. The settlement addresses CVS's liability in 25 states.
"We are announcing today that we have resolved this issue, which unfortunately resulted from a breakdown in CVS/pharmacy's normally high management and oversight standards," said Thomas M. Ryan, chairman/CEO of CVS Caremark. "While this lapse occurred in 2007 and 2008 and has been addressed, it was an unacceptable breach of the company's policies and was totally inconsistent with our values. CVS/pharmacy is unwavering in its support of the measures taken by the federal government and the states to prevent drug abuse."
Ryan said CVS has strengthened internal controls to prevent future lapses, and has made "substantial investments to improve our handling and monitoring of (pseudoephedrine) by implementing enhanced technology and making other improvements in our stores and distribution centers."
In mid-2007, after Mexico banned the sale of pseudoephedrine, federal officials said Los Angeles County experienced an epidemic in a practice known as "smurfing," where individuals buy small amounts of pseudoephedrine in separate purchase to make methamphetamine. Smurfers discovered that CVS, unlike other large chain retail pharmacies, allowed customers to make repeated purchases of pseudoephedrine which exceeded federal daily and monthly sales limits.
Smurfers inundated CVS stores in Los Angeles and Orange Counties, and Las Vegas to purchase cough and cold remedies, sometimes cleaning out store shelves. For more than a year, CVS failed to change its sales practices to stop the illicit trade.
The government has agreed not to pursue criminal charges against CVS, which has accepted responsibility for the illegal conduct and has agreed to implement a compliance and ethics program over the next three years.
CVS has entered into a separate five-year compliance agreement with the DEA.
John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.