Supermarket pharmacy chain to pay $40M over alleged inflated Medicare drug prices

Ahold Delhaize USA Inc., the Massachusetts-based supermarket operator whose retail pharmacy chains include Giant, Hannaford, Stop & Shop and Food Lion, has agreed to pay $40 million to resolve allegations that it reported inflated prescription drug prices to federal healthcare programs, causing Medicare, Medicaid and TRICARE to overpay certain claims, the Justice Department announced.

The settlement resolves allegations that Ahold Delhaize pharmacies failed to accurately report discounted member prices as their “usual and customary” prices on claims submitted to federal healthcare programs, prosecutors said. Reported usual and customary prices function as ceiling prices in the payment formulas used by those programs, and by reporting inflated figures, the pharmacies caused the government to overpay on drug claims, according to the Justice Department.

The company operated prescription savings programs at its in-store pharmacies through which enrolled members received discounted drug prices, the government alleged. Federal healthcare program requirements, including contractual obligations tied to Medicare Part D, Medicaid and TRICARE, required those discounted prices to be reported as the usual and customary rate, prosecutors contended.

Of the $40 million total, the federal share is $32.9 million, with the remainder going to participating state Medicaid programs, which are jointly funded by federal and state governments.

“Federal healthcare programs rely on pharmacies reporting accurate pricing information used in the applicable payment formulas,” Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division said. “If pharmacies report inflated ’usual and customary’ prices on claims to federal healthcare programs, the programs pay more than they should on those claims.”

The case originated as a whistleblower lawsuit filed under the False Claims Act’s qui tam provisions by Lawrence LaBenne, a pharmacist who worked at an Ahold Delhaize supermarket in Pennsylvania. LaBenne will receive $6,083,587 from the federal share of the settlement as his portion of the recovery, the Justice Department said. The case was filed in the Western District of Pennsylvania as U.S. ex rel. LaBenne v. Koninklijke Ahold Delhaize N.V., et al.

U.S. Attorney Troy Rivetti for the Western District of Pennsylvania said pharmacies are trusted to charge contracted prescription prices to Medicare and Medicaid and warned the government would pursue dishonest pharmacies.