Texas Pharmacies File RICO Suit Against CVS Caremark

AUSTIN, Texas--(BUSINESS WIRE)--Six independent pharmacies in Texas are suing CVS Caremark for Racketeer Influenced and Corrupt Organizations Act (RICO) violations and trade secret misappropriation. The complaint also says CVS Caremark contracts requiring patients to buy maintenance medications only from CVS Caremark violate the Texas "Any Willing Provider" law.

The suit claims CVS Caremark violates the firewall between the retail pharmacy and the pharmacy benefit manager (PBM) entities as required when the Federal Trade Commission approved the CVS and Caremark 2007 merger. Instead, the combined company built an information technology platform that straddles all of CVS Caremark's business segments, capturing in-depth patient data for marketing and other purposes in violation of HIPAA patient privacy laws.

"CVS Caremark traps patients and non-CVS retail pharmacies in a scheme to deny patient choice of pharmacy and to smother business competition," said Amanda Gohlke Fields, American Pharmacies general counsel. The plaintiffs are board members of American Pharmacies, a for-profit, member-owned pharmacy wholesale buying group. American Pharmacies is financing the lawsuit.

Patient information gathered from non-CVS pharmacies includes names, addresses, birth dates, medical diagnoses, prescription histories, and prescribing physicians. CVS Caremark mines the accumulated patient- and pharmacy-specific data to identify individual patient buying practices, their physicians' prescribing practices, and individual pharmacy business volume.

The American Pharmacies plaintiffs say patients report being forced, via higher copayments and refusal to cover maintenance medications, to leave their pharmacy where the patient and pharmacist have a long-time professional and personal relationship. Other patients report moving to a CVS Caremark network pharmacy out of fear of losing all health insurance coverage.

CVS Caremark contacts patients via direct mail and phone calls about their prescriptions, urging, and in some cases mandating, plaintiffs' patients to use CVS Caremark retail or mail order stores. The patients' physicians also are targeted to change prescribing practices to include drugs from CVS Caremark-favored drug makers.

"The defendants have an ambitious plan to take over 200 independent pharmacies per year," Fields said. "Taking trade secrets from their competitors' business records and excluding plaintiffs from CVS Caremark's pharmacy networks plays right into their plan. Knowing just how vulnerable a non-CVS pharmacy may be puts that pharmacy squarely in CVS Caremark's crosshairs."

She referenced CVS Caremark CEO Tom Ryan's comments earlier this year where he is quoted as saying "It's just the situation. It's just tough for them to survive, right? So we're going to continue to do that and we don't operate the stores. We move them into our store," Ryan said.

The American Pharmacies plaintiffs assert these actions are ongoing criminal practices constituting racketeering. The plaintiffs seek treble damages for the RICO violations, as well as an injunction barring CVS Caremark's practices in the future. The trade secret misappropriation claim includes a request for exemplary damages.

The plaintiffs are:

  • Rogers Pharmacy, Victoria;
  • Brookshire Bros. Pharmacy of Kirbyville;
  • Hometown Pharmacy, Fairfield;
  • Hibbs Pharmacy, Bay City;
  • Kinsey's Pharmacy, Tyler; and
  • De La Rosa Pharmacy, Weslaco.

The plaintiffs' attorneys in this matter include Donald R. Taylor and Miguel S. Rodriguez of Taylor, Dunham and Burgess, LLP. The suit is filed in the U.S. District Court for the Southern District of Texas in Victoria

Click here for a copy of the complaint.



American Pharmacies
Pamela Baggett, 512-925-9492
[email protected]