Costco Settles Charges of Lax Drug Oversight

LOS ANGELES (CN) – Costco Wholesale has agreed to pay $11.75 million to settle federal claims that it improperly filled prescriptions for controlled substances that likely allowed some prescription drugs to enter the black market.

The U.S. Justice Department announced the settlement Thursday. Prosecutors accused Costco pharmacies of failing to comply with Controlled Substances Act by filling prescriptions without a Drug Enforcement Administration number or from practitioners who did not have a valid DEA number.

In addition, the pharmacies filled prescriptions with incomplete information and failed to keep accurate dispensing records, including at central fill locations in Sacramento, California, and Everett, Washington, according to the U.S. Attorney’s Office in Los Angeles.

Costco said in a statement that it had cooperated with the government investigation and acknowledged that proper recordkeeping and systems are needed to prevent opioid drug abuse. Since 2012, the company said it had updated its systems to ensure compliance and invested in a new pharmacy management system, at a cost of $127 million over five years.

“Costco believes that at no time did its conduct put at risk the health or safety of our members or the public. Costco shares the DEA’s commitment to prevent opioid drug abuse and continues to view the DEA, along with state and local law enforcement, as partners in promoting public health,” the company said.

The settlement comes as the nation grapples with an opioid epidemic. According to DEA Assistant Administrator Louis Milione, more than 50,000 Americans died last year because of drug overdoses, many related to prescription drug use.

U.S. Attorney Eileen Decker said Costco pharmacies had filled prescriptions because of flaws in a system for validating DEA registration numbers.

“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,” Decker said in a statement.

Noncompliance covered a period from 2012 until the end of 2015, the government said. As part of the settlement agreement, Costco has agreed to allow the DEA to make unannounced inspections of Costco pharmacies without restrictions.

Prosecutors from Washington, Michigan and California joined Decker in announcing the settlement.

Costco operates 506 warehouses in the United States.