Costco Wholesale to Pay $11.75 Million to Settle Allegations of Lax Pharmacy Controls

Costco Pharmacies dispensed controlled substances inconsistent with their compliance obligations under the Controlled Substances Act

Costco Wholesale to Pay $11.75 Million to Settle Allegations of Lax Pharmacy Controls
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January 20, 2017

Costco Wholesale will pay $11.75 million to settle allegations that its pharmacies violated the Controlled Substances Act when they improperly filled prescriptions for controlled substances, the U.S. Department of Justice (USDOJ) has announced.

The settlement resolves allegations that Costco pharmacies filled prescriptions that were incomplete, lacked valid Drug Enforcement Administration (DEA) numbers, or were for substances beyond various doctors' scope of practice. Additionally, the settlement resolves allegations that Costco failed to keep and maintain accurate records for controlled substances at its pharmacies and centralized fill locations.

"Pharmacies across this country are on the leading edge of the battle against our prescription drug abuse crisis," said Annette L. Hayes, U.S. Attorney of the Western District of Washington. "A company such as Costco that distributes a significant volume of controlled substances has a responsibility to ensure it complies with regulations that help prevent opioids and other dangerous drugs from being misused or otherwise added to the illegal marketplace. I commend the DEA investigators for uncovering the violations at issue in this case, and working with Costco to ensure that systems are put in place to prevent controlled substances from ending up in the wrong hands."

"Last year, over 50,000 Americans died as a result of drug overdoses, many of which were related to the misuse of prescription drugs," said DEA Assistant Administrator Louis Milione. "This settlement demonstrates the accountability and responsibility that go along with handling controlled prescription drugs. DEA works every day to reinforce good corporate practices through outreach and education efforts and, when appropriate, with administrative and criminal action."

Under the settlement, Costco acknowledges that between January 1, 2012 and December 31, 2015, certain Costco Pharmacies dispensed controlled substances inconsistent with their compliance obligations under the Controlled Substances Act (CSA) and its implementing regulations. The violations include: filling prescriptions from practitioners who did not have a valid DEA number; incorrectly recording the practitioner's DEA number; filling prescriptions outside the scope of a practitioner's DEA registration; filling prescriptions that did not contain all the required information; failing to maintain accurate dispensing records; and failing to maintain records for their central fill locations in Sacramento, California and Everett, Washington.

To address issues uncovered in this investigation, USDOJ says that Costco made improvements in its pharmacies. The company purchased a new pharmacy management system at a total budgeted five year cost of approximately $127 million. Additionally, Costco implemented a three tier audit program of its pharmacy locations.

Under the terms of the settlement, over the next three years, DEA is allowed to conduct unannounced and unrestricted inspections of all DEA registered Costco Pharmacy locations without Administrative Inspection Warrants. The DEA monitors pharmacy prescribing practices to ensure compliance with federal law. Pharmacies found in violation face escalating penalties up to the revocation of their DEA Registration number—the authorization that allows them to write prescriptions for controlled substances.