The fine, along with an agreement to forfeit $2.6m in additional profits, represents the largest penalty in history against a company for violations under the Controlled Substances Act.
According to the DoJ, CVS sold large quantities of pseudoephedrine to drug traffickers in southern California, leading to a direct increase in methamphetamine production in the state. The company changed its sales practices only after it became aware of the DoJ investigation.
Thomas Ryan, the chairman and chief executive of CVS Caremark, which owns the chain, said in a statement that the allegations stemmed from an unfortunate breakdown in the company’s normally high management standards.
“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,” he said.
Prosecutors said that their probe into CVS uncovered “thousands” of violations of a 2005 law that limited the amount of pseudoephedrine that a customer could purchase in one day. CVS was singled out by so-called “smurfers”, who sought out the ingredient at drug stores, after it became clear that, unlike other large retail chains, it allowed customers to purchase amounts of the ingredient that exceeded federal limits. The drive to CVS allegedly increased dramatically after mid-2007, when Mexico banned the sale of pseudoephedrine, which can be found in cough medicines.
The smurfers frequented CVS stores in California and, later, Las Vegas, sometimes clearing out store shelves. For more than a year, the DoJ said, CVS failed to change its sales practices to prevent the drug trade.
The company said that the lapses occurred because of the flawed implementation of an electronic monitoring system that was meant to record sales of the ingredient, but failed. It said that this left CVS pharmacies “vulnerable to criminals who intended to purchase large amounts” of pseudoephedrine.
Under the terms of the agreement with CVS, the DoJ agreed not to pursue criminal charges. In exchange, the DoJ said CVS had accepted responsibility for illegal conduct and would implement a compliance and ethics programme for three years and a separate compliance programme with the Drug Enforcement Agency for five years.
“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 the poisonous stew,” said Andre Birotte, US attorney for the central district of California.
The Financial Times