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Thom Mrozek (213) 894-6947 |
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Release No. 10-148
October 14, 2010
CVS ADMITS ILLEGALLY SELLING PSEUDOEPHEDRINE TO CRIMINALS WHO MADE METHAMPHETAMINE, AGREES TO PAY $77.6 MILLION TO RESOLVE GOVERNMENT INVESTIGATION
LOS ANGELES – In an agreement finalized late yesterday, CVS Pharmacy, Inc., the biggest operator of retail pharmacies in the United States, has admitted that it unlawfully sold pseudoephedrine to criminals who made methamphetamine. As part of the agreement with federal prosecutors, CVS has agreed to pay $75 million in civil penalties and to forfeit the $2.6 million in profits the company earned as a result of the illegal conduct.
CVS Pharmacy, a subsidiary of CVS Caremark Corporation, failed to ensure compliance with laws limiting sales of pseudoephedrine, which allowed criminals to obtain a key ingredient used in the manufacture of methamphetamine from CVS stores located primarily in Los Angeles County; Orange County, California; and Clark County, Nevada. Between September 2007 and November 2008, CVS supplied large amounts of pseudoephedrine to methamphetamine traffickers in Southern California, and the company’s illegal sales led directly to an increase in methamphetamine production in California. CVS eventually changed its sales practices to prevent these illegal sales, but it did so only after it became aware of the government’s investigation.
The $75 million portion of the settlement represents the largest civil penalty ever paid under the Controlled Substances Act.
“This case shows what happens when companies fail to follow their ethical and legal responsibilities,” said United States Attorney André Birotte Jr. “CVS knew it had a duty to prevent methamphetamine trafficking, but it failed to take steps to control the sale of a regulated drug used by methamphetamine cooks as an essential ingredient for their poisonous stew.”
The investigation into CVS uncovered thousands of violations of the Combat Methamphetamine Epidemic Act of 2005, which, among other things, limits the amount of pseudoephedrine that a customer can purchase in one day. In 2007, CVS implemented an automated electronic logbook system to record individual pseudoephedrine sales, but the system did not prevent multiple purchases by an individual customer on the same day. The government learned that violations occurred not only in California and Nevada, but likely also in 23 other states where CVS failed to implement appropriate safeguards. The settlement therefore addresses CVS’s liability in a total of 25 states.
“This historic settlement underscores DEA’s commitment to protect the public’s health and safety against the scourge of methamphetamine,” said Michele M. Leonhart, the Acting Administrator of the Drug Enforcement Administration. “CVS’s flagrant violation of the law resulted in the company becoming a direct link in the methamphetamine supply chain. DEA will continue to work with its state and local counterparts to disrupt the supply of methamphetamine, including inhibiting access to chemicals, such as pseudoephedrine, used to produce methamphetamine.”
As part of the agreement, the government has agreed not to pursue criminal charges against CVS, which has accepted responsibility for the illegal conduct and has agreed to implement a compliance and ethics program over the next three years. In addition, CVS has entered into a separate compliance agreement with the Drug Enforcement Administration that has a five-year term.
In mid-2007, after Mexico banned the sale of pseudoephedrine, Los Angeles County experienced an epidemic in a practice known as “smurfing,” where individuals make multiple purchases of pseudoephedrine in small amounts with the intent to aggregate the purchases for use in the illegal production of methamphetamine. Smurfers discovered that CVS, unlike other large chain retail pharmacies, allowed customers to make repeated purchases of pseudoephedrine that exceeded federal daily and monthly sales limits. Smurfers inundated CVS stores in Los Angeles and Orange Counties, and later stores in the Las Vegas area, to purchase cough and cold remedies, sometimes cleaning out store shelves. For more than a year, CVS failed to change its sales practices to prevent criminals from purchasing excessive amounts of pseudoephedrine at its stores.
Pseudoephedrine, an ingredient found in various cough and cold medicines, is a “precursor chemical” that is used in the illegal manufacture of methamphetamine. Federal law limits the amount of pseudoephedrine that can be bought on a daily and monthly basis.
CVS has agreed to pay the $75 million civil penalty by tomorrow. The remaining $2.6 million in profits the company has agreed to forfeit to the government is due within 30 days.
The settlement with CVS was negotiated by the United States Attorney’s Office. The matter was investigated by the Drug Enforcement Administration, Los Angeles Field Division; the DEA’s Office of Chief Counsel; the California Bureau of Narcotic Enforcement; LA IMPACT (the Los Angeles Interagency Metropolitan Police Apprehension Crime Task Force); and Orange County Proactive Methamphetamine Laboratory Investigation Team (the PROACT Task Force). The United States Attorney’s Office for the District of Nevada provided assistance.
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Release No. 10-148
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