On September 7, 2005, the Civil Division of the DOJ, the United States Attorney's Office for the Eastern District of Pennsylvania, the OIG, and the Office of Personnel Management entered into a comprehensive Settlement Agreement with AdvancePCS, a pharmaceutical services company that administers pharmacy benefit management services for health plans and employers, including governmental employers. The investigation arose, in large part, from two separate qui tam whistleblower law suits filed by former employees of AdvancePCS and one of its predecessor companies.

The allegations involved manufacturer payments to AdvancePCS for administrative fees and products and services agreements, flat-fee rebate contracts, and payments to customers for contracts and renewals. The Settlement Agreement was made in compromise of disputed claims and constituted neither an admission of liability by AdvancePCS nor a concession by the United States that its claims were not well founded. Additionally, the Settlement Agreement provides that the agreement shall not be interpreted or construed as an agreement or acknowledgment by AdvancePCS as to whether it or any pharmaceutical manufacturer, customer, or other entity has at any time engaged in any of the conduct alleged in the agreement. In addition to the payment of $137.5 million, AdvancePCS entered into a Corporate Integrity Agreement with the OIG and a Consent Order with the DOJ and the United States Attorney's Office for the Eastern District of Pennsylvania. Additionally, the parent company of AdvancePCS voluntarily agreed to comply with the obligations applicable to its subsidiary under the CIA. The settlement did not resolve certain claims under investigation by various states relating to conduct similar to that resolved with the federal government.

The Consent Order included provisions relating to the ongoing future operation of AdvancePCS as an entity that administers pharmacy benefit management services for health plans and employers. Specifically, the Consent Order addressed: (1) AdvancePCS disclosures to its client plans; (2) payments to clients; and (3) relationships with pharmaceutical manufacturers, participants (including the procedures to be utilized with respect to drug interchanges), brokers and third-party administrators, the AdvancePCS Pharmacy and Therapeutics Committee, and pharmacists and physicians.

The terms of the Consent Order provide that it can be pleaded as a full and complete defense to any claim released thereunder with respect to conduct for the period January 1, 1996, through the effective date of the Consent Order, relating to: (1) pharmacy and operational practices and procedures at AdvancePCS's mail order pharmacies, retail pharmacies, customer care call centers, corporate offices, and clinical intervention centers; (2) rebates and other payments solicited and/or received by AdvancePCS from pharmaceutical manufacturers; (3) the performance and operation of the AdvancePCS Pharmacy and Therapeutics Committee; (4) payments to brokers and consultants performing services for AdvancePCS customers or potential customers; (5) AdvancePCS customer contract performance guarantees, incentives, and penalties; (6) AdvancePCS customer contract pricing provisions for retail pharmacy prescription claims; (7) AdvancePCS contract reimbursement rate pricing provisions with retail pharmacies; and (8) payments by AdvancePCS to customers and potential customers in the form of implementation fees or credits, stock warrants, stock equity, and cash in connection with the entry into, or renewal of, a contract.

The comprehensive Settlement Agreement and Consent Order is the first of its kind relating to a pharmacy benefits manager. Both AdvancePCS and the governmental agencies involved sought not only to resolve the ongoing investigation but also to establish a "best practices" approach for the provision of PBM services going forward.