Ontario government fines Costco $7M
The Government of Ontario has fined big-box retailer Costco over $7 million as a penalty for accepting illegal kickbacks across 29 Costco pharmacies between 2013 and 2015.
The company is known for selling a gamut of consumer goods in bulk portions, including pharmaceuticals.
The Ontario Ministry of Health announced last week that CWC Pharmacies (Ontario), owned entirely by Costco Wholesale Canada, would be penalized after finding illegal advertising payments connected to the company up to August 2015.
Costco claims it actually approached the ministry to inquire about the legality of the payments from generic drug producers and the advertising of its products.
Until that review was completed by the government body, the ministry acknowledges that Costco stopped receiving the payments voluntarily. As the investigation culminated, however, the ministry found that Costco had received $7.25 million up until the suspension, all of which violated its “terms for accepting rebates,” according to Financial Post.
The payments were used to discount the drugs available to Costco customers, the company said.
The government states that Costco has been fully cooperative, agreeing to pay the fine.
The company believed the payments were legal at the time but admitted to breaking the law upon review.
According to the ministry: “The Ontario government prohibits the operator of a pharmacy from accepting rebates from a drug manufacturer that has a product listed on the province’s drug database”.
Rebates are defined as “currency, a discount, refund, trip, free goods or any other prescribed benefit … in exchange for putting specific drug brands on pharmacy shelves.”
Last year, two Costco pharmacy directors were fined $20,000 to $30,000 by an Ontario College of Pharmacists after pleading guilty to professional misconduct relating to the same payments.
Medical researchers say that Canadians are paying too much for pharmaceuticals, often more than customers in the US. Since the province sets the price of particular drugs, drug companies try to lower the prices by paying “a secret amount back to the pharmacy as a rebate.”