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Costco Wholesale to Pay $11.75 Million to Settle Allegations of Lax Pharmacy Controls
Costco Pharmacies Filled Prescriptions that Were Improper or Incomplete

JAN 19 (SEATTLE) – Costco Wholesale will pay $11.75 million to settle allegations that its pharmacies violated the Controlled Substances Act when they improperly filled prescriptions for controlled substances.  The settlement resolves allegations that Costco pharmacies filled prescriptions that were incomplete, lacked valid DEA numbers or were for substances beyond various doctors’ scope of practice.  Additionally, the settlement resolves allegations that Costco failed to keep and maintain accurate records for controlled substances at its pharmacies and centralized fill locations. 

“Last year, over 50,000 Americans died as a result of drug overdoses, many of which were related to the misuse of prescription drugs.  This settlement demonstrates the accountability and responsibility that go along with handling controlled prescription drugs,” said DEA Assistant Administrator Louis Milione.  “DEA works every day to reinforce good corporate practices through outreach and education efforts and, when appropriate, with administrative and criminal action.”

The settlement was announced today by U.S. Attorneys Annette L. Hayes for the Western District of Washington, Michael C. Ormsby for the Eastern District of Washington, Eileen M. Decker for the Central District of California, Barbara L. McQuade for the Eastern District of Michigan and Phillip A. Talbert for the Eastern District of California.

Under the settlement reached January 18, 2017, Costco acknowledges that between January 1, 2012 and December 31, 2015, certain Costco Pharmacies dispensed controlled substances inconsistent with their compliance obligations under the Controlled Substances Act (CSA) and its implementing regulations.  The violations include: filling prescriptions from practitioners who did not have a valid DEA number; incorrectly recording the practitioner’s DEA number; filling prescriptions outside the scope of a practitioner’s DEA registration; filling prescriptions that did not contain all the required information; failing to maintain accurate dispensing records; and failing to maintain records for their central fill locations in Sacramento, California and Everett, Washington.

To address issues uncovered in this investigation, Costco made improvements in its pharmacies.  The company purchased a new pharmacy management system at a total budgeted five year cost of approximately $127 million.  Additionally, Costco implemented a three tier audit program of its pharmacy locations: Tier 1 done by pharmacy managers and regional pharmacy supervisors; Tier 2 completed by an Internal Audit group consisting of three auditors and an audit supervisor; and Tier 3 an External Audit of 40 annual audits.  
Under the terms of the settlement, over the next three years, DEA is allowed to conduct unannounced and unrestricted inspections of all DEA registered Costco Pharmacy locations without Administrative Inspection Warrants.  The Drug Enforcement Administration monitors pharmacy prescribing practices to ensure compliance with federal law.  Pharmacies found in violation face escalating penalties up to the revocation of their DEA Registration number – the authorization that allows them to write prescriptions for controlled substances.

This case was investigated by DEA Diversion Groups in Seattle, Los Angeles, Sacramento and Detroit.  While this settlement is national in scope, the settlement was negotiated by the United States Attorney’s Offices in the Western and Eastern Districts of Washington, Central and Eastern Districts of California and Eastern District of Michigan. 


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