Canadian Costco pharmacists fined for seeking illegal rebates

TORONTO (Reuters) - A Canadian regulator has ordered two Costco Wholesale Corp executives to pay a total of C$100,000 ($80,502) after pleading guilty to seeking illegally seeking rebates for the pharmacies from Indian drugmaker Ranbaxy Pharmaceuticals.

In a Monday ruling, the Ontario College of Pharmacists (OCP), a regulatory body whose probe was focused on professional misconduct, fined each of the executives, Joseph Hanna and Lawrence Varga, C$20,000 plus C$30,000 in costs. They pleaded guilty to soliciting financial support through advertising services, which were essentially rebates, for the pharmacies from Ranbaxy, according to the regulator’s website.

They are still under investigation on the matter by Ontario’s health ministry on whether they broke laws governing province’s drug benefit plan, according to Costco. [nL1N1DW2LZ]

Costco’s pharmacy business in Canada, with 98 locations, ranks as the second largest market after the United States.

“It was admitted that in the particular context of the agreement with that manufacturer (Ranbaxy) those fees could be considered rebates disallowed under Ontario law,” Costco said in an emailed statement. It suspended the advertising and customer education programs that the payments were for in 2015, Costco said.

The payments went toward defraying the pharmacies’ operating costs and not to individual pharmacists, Costco said.

Reuters was not able to reach the two executives or their representatives.

The OCP’s disciplinary body launched an investigation after Tony Gagliese, a former Ranbaxy sales consultant, filed a complaint in early 2016 saying the two Costco executives sought illegal rebates of more than C$1.2 million on drugs supplied to the retailer. [nL4N1DL0EC]

It was the first time the OCP sent a matter involving rebates to its disciplinary panel since Ontario completely banned rebates in 2013. Rebates are legal in other Canadian provinces.

Costco settled allegations a year ago that some of its U.S. pharmacies had improperly filled prescriptions for controlled substances. [nL1N1F91NW]

The company was fined more than $19 million in August for selling counterfeit Tiffany & Co rings. And it was fined $335,000 and said it would spend about $2 million to make improvements at 274 stores to settle allegations it violated the U.S. Clean Air Act.

($1 = 1.2422 Canadian dollars)

Reporting by Nichola Saminather; Editing by Jeffrey Benkoe