CVS Caremark Corp. (CVS) will pay $2.25 million to settle federal charges thatthe giant drug-store chain didn't adequately protect patients'privacy when disposing of prescriptions, pharmacy labels and other documents that contained sensitive medical and financial information.

The U.S. Department of Health and Human Services and the U.S. Federal Trade Commission opened investigations into the company's practices following media reports in 2006 and 2007alleging that CVS retail pharmacies were throwing out customer information in public, unsecured trash dumpsters outsidecertain stores.

The federal probe found CVS failed to implement adequate procedures to safeguard patient information during the disposal process and didn't adequately train employees on how to properly get rid of such information.

The FTC said that in addition to prescription drug information, CVS employees improperly disposed of credit card receipts and employee records.

CVS said in a statement that it wasn't aware of any consumer harm arising out of the alleged incidents. The company denied engaging in any wrongful conduct and said it agreed to settle the matter to avoid the time and expense of further legal proceedings.

"CVS Caremark is committed to being an industry leader in privacy matters and places high priority on protecting the privacy of its customers and plan participants," the company said.

Wednesday'ssettlement resolves potential violations of the Health Insurance Portability & Accountability Act's privacy rule.

Besides making the payment, CVS agreed to train employees to deal with sensitive data, impose sanctions for noncompliance and hire a third party to monitor its compliance.

-By Brent Kendall, Dow Jones Newswires; 202-862-9222; brent.kendall@dowjones.com