CVS To Pay $600,000 Civil Penalty for Violating FTC Asset Maintenance Agreement

CVS Corporation has agreed to pay a $600,000 civil penalty to settle Federal Trade Commission charges that the company violated a 1997 consent order and asset maintenance agreement it signed with the agency to settle charges stemming from CVS's 1997 acquisition of Revco D.S., Inc.

In its complaint, the FTC alleges that consumers were denied the full benefits of competition, including automated access to complete, up-to-date, accurate prescription dispensing records, because CVS removed the computerized pharmacy recordkeeping systems from 113 Revco pharmacies prior to divesting those pharmacies to Eckerd as required by the consent order and asset maintenance agreement.

"The Commission's action today demonstrates that parties to our orders must strictly observe their obligations to keep assets viable and competitive. It is not enough to divest on time; parties must do it right," said William J. Baer, Director of the FTC's Bureau of Competition.

In 1997, CVS and Revco signed an asset maintenance agreement with the FTC, in connection with the FTC consent order requiring divestiture of the Revco pharmacies. Under the terms of this agreement, and the consent order, the companies agreed to preserve the continued viability, marketability, and competitiveness of the Revco drug stores to be divested, including "all pharmacy files, documents, instructions, papers, books, computer files and records and all other records in any media relating to the Retail Drug Store Business." In addition, the agreement covered "lists of all customers (including third party insurers) and all files of names, addresses, and telephone numbers of the individual customer contacts, and the unit and dollar amounts of sales by product to each customer."

In its complaint, the FTC alleges that prior to its transfer of the 113 operating pharmacies to Eckerd, CVS, with Eckerd's consent, removed the pharmacy computers and all access to Revco's online computer system, effectively eliminating all automated access to the pharmacy files (including pre-existing patient profile data) necessary to operate the pharmacies competitively. Additionally, the agency charged that CVS did not provide the pharmacy files in a computerized format that could be used by Eckerd's online computer system. Instead, CVS provided Eckerd with the pharmacy files only on microfiche, which required pharmacists to manually look up relevant patient information, a much more cumbersome and time consuming process. Transferring the preexisting patient pharmacy records in this format precluded Eckerd from immediately and quickly offering pharmacy services that were competitively equivalent to the pharmacy services being offered by the pharmacies that CVS retained.

In addition to paying a civil penalty for violating the FTC's order, CVS previously paid a fine to the Commonwealth of Virginia for violating Virginia's Board of Pharmacy regulations about the proper transfer of prescription records.

The FTC's complaint and a stipulated settlement were filed on March 26 in U.S. District Court for the District of Columbia.

The Commission vote to file the complaint and accept the settlement was 4-0, with Commissioner Mary L. Azcuenaga not participating.

NOTE: This consent judgment is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.

Copies of the complaint and stipulated settlement are available from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(Case No. 1:98CV00775)