$12 Million Settlement in Suit by Pharmacists Against Texas Grocery Store Chain

As a lawyer who represents
qui tam whistleblowers, I did a double take when I saw that a grocery store based in San Antonio,
Texas, is going to have to pay the state $12,000,000 to settle False Claims
Act allegations. Since the False Claim Act only addresses fraud against
the government, I was trying to figure out how HEB Grocery Company could
have managed to cheat the government. Maybe the store was providing food
for school lunches, or for the National Guard? Maybe the store had a contract
to provide groceries to jails?

But as I read the article,
Texas Grocery Chain Pays $12 Million In Settlement Of Medicaid Fraud Case, the charges were much more mainstream than I had been thinking. Many
of the chain’s grocery stores also had pharmacies – of course!
– and three pharmacists accused the chain of Medicaid fraud. The
trio alleged that HEB grocery was charging the Texas Medicaid program
too much for some of the drugs it was dispensing to Medicaid payments.

According to three pharmacists who worked for HEB Grocery, the company
was using its RX Rewards program to hide the true price of its drugs.
The company had a discount program that applied to certain drugs sold
at its drug stores. For those drugs, customers paid $5 for a 30-day supply,
$10 for a 60-day supply, and $15 for a 90-day supply of their drugs. A
second discount covered “nearly every remaining drug HEB sold,”
according to the settlement agreement.

Under Medicaid regulations, a company has to give the Government a fair
price for any drug it sells to Medicaid patients. Because of medical entitlement
programs, the government is forced to be a consumer in the market. Congress
was concerned that companies would price gouge the federal government
in order to give sweet deals to private companies or consumers. To address
the potential problem, both Medicaid and Medicare have rules designed
to prevent that sort of price gouging. A company can charge the federal
government the usual and customary price that it charges a patient who
has no insurance coverage at all or it can charge the Medicaid program
what it cost for the pharmacy to buy the drug, plus a dispensing fee –
whichever is less. The dispensing fee is a fixed number, periodically
set by Medicare and Medicaid, which is designed to compensate the pharmacy
that is dispensing the drug for its overhead and pharmacist salaries.

The pharmacists who brought the lawsuits hailed from three different states
– Kentucky, Georgia and Missouri.

What makes this case particularly interesting is that it involves a non-traditional
provider. When you think of Medicaid fraud and Medicare fraud, you assume
it will involve hospitals, doctors, nursing homes, hospice care, etc.
But with the large number of retailers and grocery store chains that have
gotten into the pharmacy business, obviously the pool of potential fraudsters
has expanded. False Claims Act lawyers can expect an uptick in the allegations
against these other businesses that are entering the medical marketplace.

HEB Grocery denied the contentions in the lawsuit and denied that it committed
any sort of Medicaid fraud