Rite Aid to pay $2.1m in drug overcharge case

By Taryn Luna
Globe Correspondent / July 27, 2011

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Rite Aid Corp. will pay the state $2.1 million, becoming the fifth major company to settle with the attorney general’s office for allegedly overcharging for prescription drugs.

Attorney General Martha Coakley is expected to announce today the settlement with the drugstore chain, which allegedly charged Massachusetts cities and towns $1 million more for workers’ compensation claims than it billed insurance companies.

State law requires pharmacies to offer state entities the best price paid by any company.

Collectively, Walgreen Co., Shaw’s Supermarkets Inc., Stop & Shop Supermarket Co., CVS Caremark Corp., and Rite Aid have settled for almost $8 million in similar cases since Coakley’s investigation began two years ago.

“Per prescription or per community each year, it doesn’t seem like that much,’’ Coakley said. “When they are ignored, they start to add up.’’

A spokesman for Coakley said records were available only back to 2002 for the investigation and that the overcharging could have occurred before that, as well.

One hundred cities and towns will share the $2.1 million payout from Rite Aid. Boston will receive the largest amount, about $41,000, while several other municipalities, including Lawrence, Lowell, Springfield, and Wrentham, will each receive more than $10,000.

Rite Aid made no admission of wrongdoing in the settlement, according to Coakley’s office. Rite Aid did not comment.

The attorney general began looking into drug pricing a few years ago, when officials from one town, who asked that it not be named, noticed they were being overcharged. Coakley thought the problem might be an isolated instance but quickly discovered it was more widespread.

Earlier this month, Walgreen agreed to pay $2.8 million to 75 Massachusetts municipalities to settle similar allegations.

Rite Aid is the last major pharmacy the attorney general will investigate, but cases surrounding other companies are still being pursued. The attorney general would not discuss any details for fear of jeopardizing those investigations.

All five of the cases allege the pharmacies knowingly charged the cities and towns more.

In some instances, the overcharges were technical glitches, which the pharmacies were aware of but did not correct.

Wells Wilkinson, director of the Prescription Access Litigation project at Community Catalyst, said that it is not uncommon for pharmacies, drug manufacturers, or wholesalers to alter the drug-pricing system to enlarge profits.

“These lawsuits have exposed the drug-pricing system as just being fraught with potential fraud and excessive costs that health systems have to start cracking down on,’’ he said.

Taryn Luna can be reached at