State, Federal Officials Investigating CalPERS’ Drug Benefit Contract

Federal and state officials are investigating allegations about possible wrongdoing involving CalPERS' awarding of a contract to pharmaceutical benefits manager Medco Health Solutions, the Los Angeles Times reports.

Contract Background

In 2006, CalPERS awarded a three-year, $26 million contract to Medco to administer prescription drug benefits for state workers, retirees and their families.

The pension fund renewed the contract in 2009 and extended it through this year, bringing the total value of the three contracts to $48 million (Lifsher, Los Angeles Times, 3/5).

Investigation

According to CalPERS, the state attorney general's office and the Securities and Exchange Commission are investigating the activities of former CalPERS officials involved with the Medco contracts.

The pension fund said Medco allegedly paid more than $4 million to former CalPERS board member Alfred Villalobos during contract negotiations.

Officials also are investigating former CalPERS CEO Fred Buenrostro and three other former board members in connection with the Medco contract, according to CalPERS (Kasler, Sacramento Bee, 3/5).

Medco said it is cooperating with official requests, but declined to comment further on the investigations (Los Angeles Times, 3/5).

Next Up

CalPERS said it plans to review its relationship with Medco next month, after it receives a report from an attorney hired to investigate Villalobos' activities (Sacramento Bee, 3/5).