Video Case Study

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19-2b Deceptive Business Practices

In addition to privacy challenges, CVS has been accused of deceptive business practices. A 2008 civil lawsuit involving 28 states was filed against the personal benefits management division of CVS, which acts as the prescription drug claim intermediary between employers and employees. It also maintains relationships with drugstores and manufacturers. The allegations of the lawsuit included urging doctors to switch patients to name brand prescriptions under the notion that it would save them money. Furthermore, these switches were encouraged without informing doctors of the financial burden it would impose on patients, and employer health care plans were not informed that this activity would benefit CVS. This could be seen as a conflict of interest at the expense of customers. Due to these allegations, the suit called for a revision in how the division gives information to consumers. In the end, CVS signed a consent decree without admitting fault and paid a settlement of $38.5 million to reimburse states for the legal costs and patients overcharged due to the switch in prescriptions. In a similar matter, a multi-year-long FTC investigation concluded in 2009 that the company had misled consumers regarding prices on certain prescriptions in one of its Medicare plans. The switch harmed elderly customers who were billed up to 10 times the amount they anticipated. CVS settled with the FTC for $5 million to reimburse customers for the change in price.

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