CVS Health Corp. reached a $48 million settlement of a lawsuit accusing the U.S. drugstore operator of fraudulently concealing a big loss of revenue in its pharmacy benefits manager business, culminating in a plunge in its stock price.
The all-cash settlement with investors, led by three Massachusetts public pension funds, was disclosed in a Sept. 14 filing with the federal court in Providence, Rhode Island.
CVS’ share price tumbled 20.1 percent on Nov. 5, 2009, after the company, then known as CVS Caremark, revealed the loss of contracts representing about $4.5 billion of annual revenue.
Shareholders said this disclosure blindsided them, after CVS officials had repeatedly assured them that the company was doing an excellent job integrating the former Caremark Rx Inc. and retaining clients.
CVS bought Caremark in March 2007 and changed its name to CVS Health last September.
The settlement requires court approval and awaits class-action certification for shareholders from Oct. 30, 2008, to Nov. 4, 2009. CVS denied wrongdoing.
CVS spokeswoman Carolyn Castel said the payment will be covered by insurance and that the Woonsocket, Rhode Island-based company settled to avoid the “burden, uncertainty and expense of continuing litigation.”
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