CVS To Pay Largest Civil Penalty Ever Under The Controlled Substances Act for Unlawful Sales of Pseudoephedrine

Oct 15, 2010   

On October 14, 2010, the Department of Justice announced it had reached a settlement with CVS Pharmacy, Inc. (“CVS”) for unlawful sales of pseudoephedrine, a key product in the manufacture and production of methamphetamine. As part of the settlement agreement, CVS, the largest operator of retail pharmacies in the United States, has agreed to pay $75 million in civil penalties, the largest civil penalty ever paid under the Controlled Substances Act.

The violations stem from CVSs failure to comply with the Combat Methamphetamine Epidemic Act of 2005 (“CMEA”), which, among other things, limited the amount of pseudoephedrine that a customer can purchase in one day. The CMEA was passed to combat “smurfing”, a practice where methamphetamine manufacturers make multiple purchases of small amounts of pseudoephedrine with the intent to aggregate the purchases for use in the illegal production of meth.

Department of Justice investigations revealed that, while CVS had implemented an electronic records system to record individual pseudoephedrine sale, this system did not prevent multiple purchases by the same customer in the same day. The US Attorney alleged that between 2007 and 2008 CVS committed thousands of violations of the CMEA in 25 states by failing to prevent customers from purchasing pseudoephedrine in amounts in excess of the law.

The total settlement will cost CVS $77.6 million, $75 million in civil penalties and CVS has agreed to forfeit $2.6 million in profits earned as a result of the unlawful conduct. CVS has agreed to pay the $75 million in civil penalties by October 15, 2010 and forfeit the $2.6 million in profits earned within 30 days. The settlement also requires CVS to implement a new compliance and ethics program over the next three years. Additionally, CVS has entered into a separate 5 year compliance program with the Drug Enforcement Agency.

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