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, according to officials.
The settlement resolves allegations that Costco pharmacies filled prescriptions that were incomplete, lacked valid 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.
“Last year, over 50,000 Americans died as a result of drug overdoses, many of which were related to the misuse of prescription drugs. This settlement demonstrates the accountability and responsibility that go along with handling controlled prescription drugs,” said DEA Assistant Administrator Louis Milione. “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, the DEA will be allowed to go into Costco and inspect pharmacy drug records over the next three years without warrants.
“These are not just administrative or paperwork violations – Costco’s failure to have proper controls in place in its pharmacies likely played a role in prescription drugs reaching the black market,” said U.S. Attorney Eileen M. Decker. “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.”
Under the settlement that was finalized Wednesday, Costco acknowledged that, from the beginning of 2012 through the end of 2015, certain Costco Pharmacies dispensed controlled substances in violation of federal drug laws.
The violations included the following incidents:
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
- Failing to maintain records for their central fill locations in Sacramento and Everett, Washington
As part of an investigation in 2012 into the diversion of controlled substances by local physicians, the DEA’s Los Angeles Field Division discovered that Los Angeles-area Costco pharmacies had filled numerous prescriptions issued by individual practitioners who lacked a valid DEA registration number.
Between January 2012 and August 2013, area Costco pharmacies filled dozens of prescriptions issued by individual practitioners who lacked a valid DEA registration number, and filled nearly 200 prescriptions issued by individual practitioners with a valid DEA registration number but used an invalid DEA registration number when recording and reporting the prescription.
Costco filled these prescriptions because its system for validating DEA registration numbers was deficient and flawed.
“Pharmacies across this country are on the leading edge of the battle against our prescription drug abuse crisis,” said United States Attorney Annette L. Hayes 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 Drug Enforcement Administration 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.”
To address issues uncovered in this investigation, 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.
- Costco implemented a three tier audit program of its pharmacy locations: Tier 1 done by pharmacy managers and regional pharmacy supervisors; Tier 2 completed by an Internal Audit group consisting of three auditors and an audit supervisor; and Tier 3 an External Audit of 40 annual audits.
Michael C. Ormsby, U.S. Attorney for the Eastern District of Washington, said “Opioid misuse has reached epidemic levels in the United States. This important matter is yet another example of the tenacious dedication of Drug Enforcement Administration investigators in uncovering and addressing corporate regulatory noncompliance. The DEA must be commended for its superb efforts in combating the opioid problem at so many different levels, including regulatory compliance.”
“Pharmacies are the gatekeepers responsible for ensuring the lawful use of powerful drugs that have a legitimate medical purpose but are easily abused. The CSA provides the statutory oversight to ensure that pharmacies keep meticulous records,” said U.S. Attorney Phillip A. Talbert of California. “The successful resolution of this matter demonstrates the Department of Justice’s commitment to enforcing the CSA.”
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