Federal investigators with the Drug Enforcement Administration followed a trail that led them to the worst offenders: 48 CVS pharmacies, 40 of them in Los Angeles County.
Smacked with a fine for the record books, CVS Pharmacy Inc. agreed to pay $75 million.
In a settlement, the company admits it failed to prevent massive illegal purchases of cold medicine such as Sudafed.
Drug dealers known as "Smurfers" buy it to break it down and convert it into methamphetamine, a highly addictive street drug. Local investigators discovered an alarming pattern: When they busted local labs, they discovered that CVS was often the main source for the key meth ingredient.
"Smurfers" had learned that there was a glitch in CVS's electronic monitoring system. It would identify the purchase of a daily legal limit of 3.6 grams of Sudafed, but not repeat purchases on the same day.
"One bad actor tells the next bad actor, and we have that 'You tell two friends, and you tell two friends,' situation, and the next thing we know, CVS is inundated by these 'Smurfers' who are buying as much pseudoephedrine as they can, and essentially wiping CVS stores here in the Los Angeles area out of their stock, and then show up the next day the delivery came in, and rinse and repeat, as we say -- do it over and over," said Assistant U.S. Attorney Shana Mintz.
CVS says it was the result of a flaw in a computer program called MethCheck.
The CEO of CVS Caremark said Thursday, "We have resolved this issue, which unfortunately resulted from a breakdown in CVS's normally high management oversight standards."
Yet investigators say upper-management officials knew there was a problem. Their own cashiers and clerks told them that they were seeing outright violations.
"The supervisors told the clerks, 'Just keep selling. If the system allows, that's what you're supposed to do, you're supposed to sell.' The employees were very concerned. They felt that they were in many occasions, they knew they were selling to drug dealers. They asked, 'You're going to make illegal drugs with this?' And the Smurfers didn't hide it," said Mintz.
The U.S. Attorney says the fine sends a message. The actual amount of profit CVS made from the illegal sales was $2.6 million, just a fraction of that $75 million fine.