WOONSOCKET – CVS Caremark Corp. disclosed late Thursday that it is under investigation by the Federal Trade Commission, capping a day of bad news for the pharmacy giant that saw its market value cut by about $10 billion.

“The drive for lower health care costs may have claimed its first big victim,” Wall Street Journal columnist John Jannarone wrote this morning of CVS.

In a Securities & Exchange Commission filing, CVS said the FTC’s “nonpublic investigation” began in August. The company said it is “cooperating in the FTC’s investigation and is voluntarily producing documents and other information on a rolling basis as requested by the FTC.”

CVS also said it “remains confident that its business practices and service offerings, which are designed to reduce health care costs and expand consumer choice, are being conducted in compliance with the antitrust laws.”

Various groups, including unions and an independent pharmacists’ association, have been pushing the federal government to investigate whether the 2007 merger of CVS and Caremark Rx Inc. has damaged competition, charges CVS strongly denies.

“Community pharmacists commend the FTC, and especially [FTC] Chairman [Jon] Liebowitz, for launching this investigation,” Bruce T. Roberts, executive vice president and CEO of the National Community Pharmacists Association, said in a statement. “We also appreciate the many members of Congress who spoke up for patients.”

CVS stock fell 20 percent on Thursday to close at $28.87 a share, as investors worried anew about whether the company made the right decision in buying Caremark two years ago.

The day started out on a high note for CVS as the company posted a record third-quarter profit of just over $1 billion, up 39 percent from a year earlier.

But the mood turned sour about two hours later when CVS CEO Thomas Ryan disclosed “some big client losses” by its pharmacy-benefit management (PBM) division in a conference call with investors. The contracts had an estimated value of $3.7 billion.

“CVS Caremark is struggling to explain to customers the benefit of a retail and pharmacy management business together,” Adam Fein, president of Pembroke Consulting and author of a blog called Drug Channels, told Dow Jones Newswires.

“We continue to believe that the melded model (PBM and drugstore) does not create added value,” BMO Capital Markets analyst Dave Shove said, according to Dow Jones. “Massive contract losses send a similar message from benefit managers.”

“We are skeptical regarding a speedy restoration,” he added.

David Rickard, CVS’ outgoing chief financial officer, told Dow Jones that investors were overreacting to the news of the PBM client losses, saying it represented a small number of large contracts.

“People are rightfully concerned about the financial progress this implies, but I think they have allowed that to bleed over into a perception there's something strategically amiss,” he said.

A CVS spokeswoman told The Wall Street Journal: “We’ve won 124 new contracts for 2010 and our retention rate is 92 percent. The combination of CVS and Caremark is lowering health care costs and improving patient outcomes.”