Two Costco pharmacy directors pleaded guilty to accepting illegal kickbacks from a drug company to get its medications stocked at the retail chain.
Joseph Hanna and Lawrence Varga admitted to soliciting improper payments, known as rebates, from generic drug manufacturer Ranbaxy, according to an agreed statement of facts presented Monday at Ontario College of Pharmacists disciplinary hearing.
Costco received more than $1.2 million in payments from Ranbaxy for advertising services, which could reasonably be regarded as illegal rebates, the disciplinary hearing heard.
Charges that the men allegedly received unlawful payments from four other generic drug makers were withdrawn.
A penalty for professional misconduct will be determined later at Monday’s hearing.
In Ontario, it’s illegal for pharmacies to receive any direct or indirect rebate from a drug company. Critics say these payments compromise pharmacists’ professional independence and can artificially inflate the price of generic prescriptions.
The Ontario government is conducting its own investigation into Costco’s acceptance of rebates.
The college first received a complaint about Costco from Tony Gagliese, who was a sales rep for Ranbaxy, in August 2015.
At the heart of the complaint was a secretly recorded phone conversation in which Hanna explains how much the drug company would have to pay to “greatly reduce the likelihood of somebody eating your business.”
Gagliese’s complaint alleged the wholesale Costco chain required Ranbaxy to pay “renamed” rebates on its Ontario sales through pricey “clinic support or marketing initiatives” in order to circumvent the law.
More to come