BUSINESS BRIEFING / PHARMACEUTICALS
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CVS Caremark Corp. shares plunged 20% after the company said its unit for managing pharmacy benefits lost $3.7 billion in contracts and disclosed that antitrust regulators were probing some business practices.
The division, which negotiates drug prices with manufacturers for corporate and government customers, lost more business than anticipated, CVS Chief Executive Tom Ryan said. The Woonsocket, R.I., company predicts that margins and operating profit at the pharmacy-benefits management unit will shrink by 10% to 12% in 2010.
Ryan said he would take over the business from Executive Vice President Howard McLure, who is retiring, until a new leader is found. The $3.7 billion in lost contracts during the third quarter brings this year’s total to $4.8 billion.
The Federal Trade Commission confirmed that it was probing the company without providing details. CVS is confident it conducts business in compliance with antitrust laws, Chief Financial Officer David Rickard said.
CVS, which operates more than 7,000 drugstores, entered the pharmacy-benefits management business in 2007 with the purchase of Caremark Rx Inc. for about $22 billion.
CVS shares fell $7.28 to close at $28.87.
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