This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Caremark Probe Goes Postal

Caremark's (CMX) customers could be opening some unwelcome mail.

Texas prosecutors have started requesting information from Caremark clients as they seek to determine whether the pharmacy benefit manager, or PBM, has engaged in Medicaid fraud. They have already issued a civil investigative demand to at least one major Caremark client -- the city of Austin -- and hope to send out similar letters, without the company's review, going forward.

Caremark has launched a courtroom battle in an effort to keep that from happening. The company submitted the letter that was sent to Austin as an exhibit to support a protective order that would block other letters from going out. The judge has yet to publish a ruling.

In the meantime, however, Caremark did say that the court has asked the government to supply the company with copies of any demand letters sent out to its customers and that it is "satisfied" with that action.

For Caremark, the courtroom saga is the latest part of a sweeping Medicaid fraud investigation that has been building against the company for years. Federal and state prosecutors have accused the PBM of failing to properly reimburse Medicaid -- the so-called "payer of last resort" -- for drugs that should have been covered by the company's clients. The government has estimated damages in the case at $500 million.

Caremark has denied any wrongdoing and insists that it owes the government nothing. Ultimately -- even though Caremark itself rejected the Medicaid claims -- the company's unsuspecting customers could wind up on the hook.

For now, at least, the government seems to have one particular target in mind.

"The city of Austin is not a party to this action," the Texas attorney general stresses in a recent courtroom filing that defends the office's use of civil investigative demands. "The state's action in this case is only against Caremark."

In the meantime, the company's stock continues to perform quite well. Shares of Caremark, while down 19 cents to $49.76 on Friday, have nearly doubled over the past two years.

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,919.59 +80.85 0.48%
S&P 500 1,981.60 +9.86 0.50%
NASDAQ 4,527.5140 +19.2020 0.43%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs