The Teacher Retirement System of Texas selected CVS Caremark Corp. for a contract valued at almost $1 billion to provide its pharmacy-benefits services, Bloomberg News reported Thursday.

The Teacher Retirement System will now start negotiating the two-year deal with CVS, the pension fund said this week in an e-mailed statement to Bloomberg. The contract will begin in September 2010 and replaces an existing agreement with Woonsocket-based CVS. The contract allows for as many as four one-year renewal options.

“CVS is gratified that following a comprehensive review process the Teacher Retirement System of Texas has chosen to renew our contract as pharmacy-benefits manager,” the company said in an e-mailed statement.

The new contract is valued at about $480 million in 2011 and $518 million in 2012, according to Juliana Fernandez Helton, a spokeswoman for the Teacher Retirement System. Before the announcement, Helton said before the announcement that in a 2008 survey, 94.2 percent of the fund’s retired members said they were either “satisfied” or “very satisfied” with CVS services.

CVS, Medco Health Solutions Inc. and Express Scripts Inc. are the three largest U.S. managers of pharmacy benefits. Bloomberg reported that Medco and Express Scripts declined to say whether they bid before the selection was announced.

Charlotte Clifton, a trustee for the Texas pension fund, told Bloomberg last week that the group would examine the state attorney general’s lawsuit that claims the Caremark unit owes the state more than $70 million tied to alleged Medicaid fraud. The fund also considered a 2008 state audit showing CVS charged a Texas university more than Franklin Lakes, N.J.-based Medco for similar services.

The attorney general’s April lawsuit said Caremark, which CVS bought in 2007, failed to reimburse Texas for patients who were eligible for coverage under a private plan as well as Medicaid, according to a filing in a state court in Austin.

The Texas Medicaid agency wants CVS to process claims in a way that is too costly, Christine Cramer, a CVS spokeswoman, told Bloomberg this week. A federal judge in Texas ruled in CVS’s favor in a similar lawsuit last year, she said.

The Teacher Retirement System’s decision could quell some apprehension investors have had regarding CVS recently. Through Thursday, CVS has dropped 13 percent in New York Stock Exchange trading since the company said in November it had lost $4.8 billion in 2010 contracts for reasons including price and service.

CVS Caremark Corp. (NYSE: CVS) operates the CVS/pharmacy stores; the CVS.com online pharmacy; Caremark Pharmacy Services; and the MinuteClinic retail-based health care subsidiary. Additional information is available at investor.cvs.com.