FTC looking into business practices of CVS

New York City The Federal Trade Commission is investigating some of CVS Caremark Corp.'s business practices, the company said Thursday.

The drugstore chain and pharmacy benefits manager did not disclose the details of the "nonpublic investigation," but said it has not violated any antitrust laws. CVS suggested the FTC inquiry is connected to complaints made by the Change to Win coalition of labor unions. Change to Win has said CVS Caremark's size and buying power is bad for consumers, and accused CVS of a stocking expired products and violating patients' privacy, among other issues.

Change to Win also opposed CVS' acquisition of Longs Drugs Stores last year. The Woonsocket, R.I., company said the turmoil began in early 2007, when the coalition began trying to unionize CVS employees.

"We think there are serious issues with the company," Change to Win spokesman Ahmer Qadeer told The Associated Press. "We think there's a real question of privacy problems, how they may use patient data, and real questions with this business model."

In other news, CVS reported its third-quarter results on Thursday. Net revenues for increased $3.8 billion to $24.6 billion, up from $20.9 billion during third quarter 2008. Net income jumped 39% to $1.02 billion

In reporting its results, CVS disclosed that its Caremark pharmacy benefits management unit has lost $3.7 billion in contracts in recent months. The division, which negotiates drug prices with manufacturers for corporate and government customers, lost more business than anticipated, CVS CEO and chairman Tom Ryan said on a conference call. Ryan said he will take over the business from executive VP Howard McLure, 52, who is retiring, until a new leader is found.

The $3.7 billion in lost contracts during the third quarter brings this year’s total to $4.8 billion. CVS has cut contract prices at the unit as it seeks to lure new customers and retain existing ones.

CVS lost a contract with the state of Ohio valued at $500 million because of a regulatory issue, Ryan said. The company also lost a $1 billion contract for the state of New Jersey’s Blue Cross Blue Shield, he said. Price and service were reasons for some of the losses, he said.

“We’re committed to turning around the PBM business,” he said on the call.