The Justice Department announced today that Rite Aid Corporation and its subsidiaries, Elixir Insurance Company, RX Options LLC, and RX Solutions LLC, have agreed to resolve allegations of violating the False Claims Act (FCA) by inaccurately reporting drug rebates to the Medicare Program. As part of the settlement, Elixir Insurance and Rite Aid will pay the United States $101 million, while RX Options and RX Solutions will grant an allowed, unsubordinated general unsecured claim for $20 million in Rite Aid’s bankruptcy case pending in the District of New Jersey. The settlement was approved on June 28 by the bankruptcy court as part of Rite Aid’s reorganization plan.
Principal Deputy Assistant Attorney General Brian M. Boynton stated, “Participants in Medicare’s drug program must accurately report price concessions, including drug manufacturer rebates, to ensure that the government receives the benefit of those concessions.” He emphasized that the settlement reflects the Justice Department's commitment to hold accountable entities that prioritize financial interests over taxpayer programs.
U.S. Attorney Rebecca C. Lutzko for the Northern District of Ohio remarked, “Rite Aid and its Elixir subsidiaries lined their corporate pockets with millions of dollars of manufacturer rebates that should have been reported to Medicare.” She added that her office would not tolerate deceptive health-insurance practices.
Under Medicare Part D, private entities known as Part D Plan Sponsors administer insurance plans providing prescription drug coverage to enrolled beneficiaries. These sponsors must submit annual reports to the Centers for Medicare and Medicaid Services (CMS) detailing rebates and other remuneration received from drug manufacturers. CMS uses these reports in an annual reconciliation process determining payments due to or from Plans at year-end.
The settlement resolves allegations that between 2014 and 2020, defendants improperly reported portions of manufacturer rebates as bona fide service fees without negotiation with manufacturers. It is further alleged that Elixir Insurance knew these retained rebates did not meet regulatory definitions.
Deputy Inspector General for Investigations Christian J. Schrank of HHS-OIG said, “Truthful and accurate documentation in delivering health care goods or services is crucial to federal health care programs' integrity.”
The civil settlement includes claims brought under the qui tam provisions of the FCA by Glenn Rzeszutko, a former employee of RX Options. The FCA allows private parties to sue on behalf of the United States and share any recovery. The relator's share has yet to be determined.
The Civil Division’s Commercial Litigation Branch and U.S. Attorney’s Office for Northern District Ohio handled this matter with substantial assistance from HHS-OIG and FBI Cleveland Division.
Trial attorneys Christopher Wilson and Dan Schiffer from the Civil Division’s Fraud Section along with Assistant U.S. Attorney Jackson Froliklong handled this matter. Additionally, Assistant Director Mary Schmergel and Trial Attorneys Gregory Werkheiser and Ryan Lamb are managing Rite Aid's bankruptcy proceedings.
Today’s settlements underscore governmental efforts against healthcare fraud using tools like the FCA. Tips about potential fraud can be reported to HHS at 800-HHS-TIPS (800-447-8477).
The claims asserted against defendants are allegations only; there has been no determination of liability.
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