Rite Aid & Subsidiaries to Pay $121 Million in False Claims Settlement

Rite Aid Corporation and its subsidiaries have agreed to pay $121 million to resolve allegations of violating the False Claims Act. The U.S. Department of Justice announced the settlement on Wednesday, July 10, 2024, marking a major enforcement action against one of the country's largest retail pharmacy chains.

The settlement stems from accusations that Rite Aid and its subsidiaries, including Elixir Insurance Company, RX Options LLC, and RX Solutions LLC, failed to accurately report drug rebates to the Medicare Program between 2014 and 2020. According to the Justice Department, the companies improperly reported portions of rebates received from drug manufacturers as bona fide service fees, even though manufacturers had not negotiated to pay such fees.

Under the terms of the agreement, Elixir Insurance and Rite Aid will pay $101 million to the United States. Additionally, RX Options and RX Solutions will grant the U.S. government an allowed, unsubordinated, general unsecured claim for $20 million in Rite Aid's ongoing bankruptcy case in the District of New Jersey.

Principal Deputy Assistant Attorney General Brian M. Boynton emphasized the importance of accurate reporting in Medicare's drug program, stating, "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."

The case was initially brought to light by a whistleblower, Glenn Rzeszutko, a former employee of RX Options, under the qui tam provisions of the False Claims Act. The share of the proceeds that Rzeszutko will receive has not yet been determined.

This settlement underscores the government's commitment to holding healthcare entities accountable for their financial practices. U.S. Attorney Rebecca C. Lutzko for the Northern District of Ohio stated, "Our office will not tolerate deceptive health-insurance practices, and we will vigorously pursue those who violate the FCA."

The agreement was approved on June 28 by the bankruptcy court as part of Rite Aid's plan of reorganization, which is expected to become effective later this summer. The settlement amount was based on the companies' ability to pay.

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