CVS to Pay $77.6 Million to Settle Charges of Selling Meth Ingredient to Criminals

CVS Caremark (CVS) has agreed to pay $77.6 million in fines to settle charges that it illegally sold a chemical, common in some cold and cough medicines, that ended up being used to make methamphetamine.

The U.S. Drug Enforcement Administration said Wednesday that the pharmacy chain failed to appropriately monitor the sale of cold medicines containing pseudoephedrine at its stores in California and Nevada, in some cases allowing customers to buy all of the cold medicines in stock. Between September 2007 and November 2008, CVS supplied pseudoephedrine to drug traffickers in Southern California, leading directly to an increase in meth production in the state, according to the DEA.

"CVS's flagrant violation of the law resulted in the company becoming a direct link in the methamphetamine supply chain," said Michele M. Leonhart, acting administrator of the DEA, in the statement. "DEA will continue to work with its state and local counterparts to disrupt the supply of methamphetamine."

In addition to California and Nevada, CVS likely exceeded federally regulated sales limits of pseudoephedrine in 23 other states, the DEA said. In return for paying the settlement, CVS won't be charged with criminal activity by the DEA.

The settlement includes $75 million in civil penalties, the largest amount ever triggered by the U.S. Controlled Substances Act, as well the forfeiture of $2.6 million in profits from the sales of cold medicines. As part of the agreement, CVS also admitted to unlawfully selling pseudoephedrine to criminals, according to the DEA.

"While this lapse occurred in 2007 and 2008 and has been addressed, it was an unacceptable breach of the company's policies and was totally inconsistent with our values," CVS CEO Thomas M. Ryan said in a separate statement Wednesday. "CVS pharmacy is unwavering in its support of the measures taken by the federal government and the states to prevent drug abuse."

CVS shares fell 1.25% to close at $31.25 on Wednesday. In July, the company posted a second-quarter net income of $821 million, down 7.3% from the same quarter a year earlier, on revenue that had declined 3.5% to $24 billion.