On July 10, 2024, the United States Department of Justice announced that Rite Aid Corporation (“Rite Aid”) and 10 subsidiaries and affiliates have agreed to settle the government’s allegations under the False Claims Act (FCA) and Controlled Substances Act (CSA) asserted in United States ex rel. White et al. v. Rite Aid Corp., et al., No. 1:21-cv-1239 (N.D. Ohio).
The government’s complaint alleged that, from May 2014 through June 2019, Rite Aid knowingly dispensed at least hundreds of thousands of unlawful prescriptions for controlled substances that (1) lacked a legitimate medical purpose and were not issued in the usual course of professional practice and/or (2) were not valid prescriptions, were not for a medically accepted indication or were medically unnecessary. These unlawful prescriptions included, for example, prescriptions for the dangerous, highly diverted combination of drugs known as “the trinity,” prescriptions for excessive quantities of opioids, such as highly addictive oxycodone and fentanyl, and prescriptions issued by prescribers who Rite Aid pharmacists had repeatedly identified internally as suspicious and as writing unlawful, unnecessary prescriptions. The government further alleged that Rite Aid filled these prescriptions despite clear “red flags,” which highly indicated the prescriptions were unlawful and which pharmacists are trained to recognize. Rite Aid also allegedly ignored substantial evidence that its stores were dispensing unlawful prescriptions, including specific concerns raised by its pharmacists, and intentionally deleted internal notes about suspicious prescribers written by Rite Aid pharmacists, such as “writing excessive dose[s] for oxycodone,” and “DO NOT FILL CONTROLS.” By knowingly dispensing unlawful prescriptions for controlled substances, the government alleged that Rite Aid violated the CSA and, where Rite Aid sought reimbursement from federal healthcare programs, also violated the FCA.
Under the settlement, the government will be paid $7.5 million and have an allowed, unsubordinated, general unsecured claim of $401.8 million in Rite Aid’s bankruptcy case that is pending in the District of New Jersey. The settlement was approved on June 28, 2024 by the bankruptcy court as part of Rite Aid’s plan of reorganization. The amount the government will recover on its unsecured claim under the settlement will depend on the ultimate amount of assets available to the bankruptcy estate for distribution to unsecured creditors. During the relevant time period, Rite Aid operated one of the country’s largest retail pharmacy chains with over 2,200 retail pharmacies in 17 states.
The civil settlement includes the resolution of claims that certain Rite Aid pharmacies in Washington State violated the CSA by filling prescriptions written by prescribers who lacked proper controlled substance prescribing authority. The settlement also resolves claims brought in 2019 under the qui tam, or whistleblower, provisions of the FCA by Andrew White, Mark Rosenberg and Ann Wegelin, who all previously worked for Rite Aid at various pharmacies. The FCA authorizes private parties to sue on behalf of the United States for false claims and share in any recovery, and permits the United States to take over the lawsuit, as it did here in part. The relators will receive 17% of the government’s FCA recovery in this matter.
In addition to the civil settlement, Rite Aid has entered into agreements with DEA and HHS-OIG to address its obligations going forward. Rite Aid and DEA entered a memorandum of agreement (MOA) designed to increase communication between the company, its retailers and DEA. Employees will receive additional training to help them identify illegitimate prescriptions and minimize the risk of drug diversion. The MOA also requires Rite Aid to create and keep materials relevant to DEA investigations for a minimum of five years. Rite Aid further commits to implementing and managing an anonymous hotline for employees, patients and the public to report suspected illegal dispensing of highly diverted controlled substances as well as suspected violations of the CSA. Rite Aid has also entered into a corporate integrity agreement (CIA) with HHS-OIG. The CIA includes a prescription claims drug review to have an Independent Review Organization to determine whether prescription drugs are properly prescribed, dispensed and billed.
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