Medco Health Solutions Inc. (MHS) agreed to pay the California
attorney general's office $2.8 million to resolve allegations that
a consultant for the company could have unduly influenced the
awarding of a state drug-benefits contract.
Money from the settlement will reimburse the state for attorney
fees and investigative costs, though the company did not admit to
wrongdoing.
The state accused Medco of failing to ensure a $4 million
contract paid to consultant Alfred Villalobos did not help fund
improper payments, gifts and campaign contributions to board
members of the California Public Employees' Retirement System, also
known as CalPERS.
The massive state-benefits manager eventually granted Medco a
contract in 2005, though its board later voted against renewing the
deal. CalPERS administers retirement benefits for more than 1.6
million public employees in California, making it the largest
public pension fund in the U.S.
In a statement Friday, the fund said it had spent the past three
years "putting stringent policies into place to avoid conflicts of
interest and to ensure the highest ethical standards."
"We have clear divisions of authority and delegation between the
Board and CalPERS staff, policies that outline our roles and
responsibilities, and an evaluation and self-assessment process,"
the statement said.
Medco noted the latest agreement didn't find the company guilty
of any wrongdoing. The company also said the independent members of
its board determined its employees acted ethically and broke no
laws, according to its filing with the U.S. Securities and Exchange
Commission.
Medco's latest fourth-quarter earnings rose as the
pharmacy-benefit manager reported higher prescription volumes and
steeper prices for brand-name drugs. Its recent performance has
given it some momentum heading into a planned acquisition by rival
Express Scripts Inc. (ESRX).
Medco shares were off 8 cents at $68.41 after hours.
-By Drew FitzGerald, Dow Jones Newswires; 212-416-2909; Andrew.FitzGerald@dowjones.com