Costco Settles Federal Charges That It Turned Blind Eye To Bad Prescriptions

Image courtesy of (Nicholas Eckhart)

Costco has reached a deal with the U.S. Department of Justice to pay $11.75 million to resolve federal allegations that the warehouse club’s pharmacies violated the Controlled Substances Act by filling prescriptions they probably shouldn’t have.

The DOJ announced the deal late Thursday — one of several high-profile settlements and enforcement actions in recent days — saying that this agreement ends the government’s investigation into allegations that Costco pharmacies filled prescriptions that were incomplete, lacked the proper paperwork, or which fell outside the prescribing doctor’s scope of practice.

According to the DOJ, from Jan. 1 2012 to Dec. 31, 2015, some Costco pharmacies in Washington, California, and Michigan dispensed controlled substances inconsistent with their compliance obligations under the Controlled Substances Act.

Specifically, the DOJ claims that pharmacies filled prescriptions from practitioners who did not have a valid Drug Enforcement Agency (DEA) number; incorrectly recorded the practitioner’s DEA number; filled prescriptions outside the scope of a practitioner’s DEA registration; and filled prescriptions that did not contain all the required information.

Additionally, the pharmacies allegedly failed to maintain accurate dispensing records and failed to maintain records for their central fill locations in Sacramento, CA, and Everett, WA.

While prosecutors don’t specify if the investigation found customers were abusing prescription drugs from Costco, they note that lax pharmacy controls can have an impact on opioid abuse.

“These are not just administrative or paperwork violations – Costco’s failure to have proper controls in place in its pharmacies played a role in prescription drugs reaching the black market,” said U.S. Attorney Eileen Decker of the Central District of California in a statement. “Costco pharmacies in Southern California filled numerous prescriptions for drugs that should not have been sold to consumers because of its flawed system for validating DEA registration numbers.”

As part of the settlement, Costco acknowledges that some of its pharmacies were indeed in violation of the Controlled Substances Act.

Costco said in a statement Friday that it cooperated fully with the investigation.

“Costco believes that at no time did its conduct put at risk the health or safety of our members or the public,” the company said. “Costco shares the DEA’s commitment to prevent opioid drug abuse and continues to view the DEA, along with state and local law enforcement, as partners in promoting public health.”

In addition to paying a $11.75 million fine, Costco purchased a new pharmacy management system, and implemented a three-tier audit program that includes internal and external audits.

As part of the settlement, the DEA for the next three years can conduct unannounced and unrestricted inspections of all DEA registered Costco Pharmacy locations without Administrative Inspection Warrants.