CalPERS in Talks With Rx Benefits Firm Facing Allegations of Fraud

CalPERS is negotiating a pharmacy benefits management contract with Caremark Rx, which currently is being sued for allegedly defrauding the pension system of tens of millions of dollars, the Los Angeles Times reports.

Background

The pension fund is seeking a contractor to manage the delivery of mail-order prescriptions for about 300,000 public workers, retirees and their families.

In March, CalPERS' board canceled contract talks with Medco Health Solutions after an internal investigation found that Medco allegedly paid more than $4 million in bribes to win a three-year, $26 million contract in 2006.

After canceling the Medco negotiations, CalPERS' board told its staff to begin contract talks with Caremark.

Caremark Lawsuit

The whistle-blower lawsuit against Caremark is scheduled to go to trial May 10 in Los Angeles County Superior Court.

Private attorneys, who filed the case in the name of the state, claim that Caremark made illegal and unauthorized changes to prescriptions submitted by CalPERS members between 2003 and 2006. The attorneys say the pharmacy benefits firm often switched patients to cheaper drugs or canceled prescriptions.

In addition, attorneys claim that Caremark falsified some dates in its transaction records to improve its performance for "turn-around-time."

Caremark Response

Christine Cramer, spokesperson for Caremark, said that the lawsuit is without merit and that the company is defending itself against the allegations.

Cramer said, "We are confident that our prior services to CalPERS were conducted in accordance with both our CalPERS contract and applicable law," adding, "We do not believe this lawsuit should have any impact on the current CalPERS contracting process."

CalPERS Response

Brad Pacheco, CalPERS spokesperson, said the pension fund "has been following this (Caremark) lawsuit since day one." He added that CalPERS has yet to sign a contract with a pharmacy benefits manager, adding that "as part of the negotiations on a potential contract, we will evaluate and take into account claims in the [Caremark] case."

However, Tom Dresslar -- spokesperson for State Treasurer Bill Lockyer (D), a CalPERS board member -- said the pension fund's board was unaware of the Caremark case when they directed staff to negotiate with the pharmacy benefit manager.

Dresslar added that Lockyer is concerned that CalPERS might need to do business with Caremark because few companies have the ability to handle the size of CalPERS' pharmacy benefits management accounts (Lifsher, Los Angeles Times, 4/16).