Costco pharmacies hit with $7.25M fine after probe of money the chain collected from drug companies


Costco pharmacies have been fined $7.25 million for violating an Ontario kickback regulation designed to keep down the cost of prescription medications.

The fine, quietly posted Friday on a government website, follows a three-year investigation into “advertising services” Costco was alleged to have charged its drug suppliers to get their medications stocked at the retail chain’s stores.

Costco pharmacies have been fined $7.25 million for violating an Ontario kickback regulation designed to keep down the cost of prescription medications.
Costco pharmacies have been fined $7.25 million for violating an Ontario kickback regulation designed to keep down the cost of prescription medications.  (Toronto Star)

It’s illegal in Ontario for drug companies to give direct or indirect incentives — known as rebates — to induce a pharmacy to stock their products. The province has said these kickbacks artificially inflate the price of drugs.

The Ministry of Health and Long-Term Care determined that Costco’s acceptance of millions of dollars for advertising services from 2013 to 2015 “violated the prohibition on rebates.”

“The Ministry takes non-compliance with the prohibition on rebates seriously and will continue to assess compliance with the prohibition by manufacturers, wholesalers and pharmacies,” read a notice from the executive officer of Ontario’s public drug programs, who is in charge of enforcing anti-rebate legislation.

In a statement, a Costco spokesperson said its pharmacies “honestly believed at the time that the advertising programs” did not break Ontario’s rebate rules, adding that the company used the money “to reduce dispensing fees and drug mark-ups” for its customers.

“(Costco pharmacies) would never knowingly or intentionally act in a manner which was inconsistent with the laws of Ontario,” the statement said.

The Star first revealed in March 2016 that Costco had been accused of squeezing nearly $1.3 million in unlawful rebates from Ranbaxy, a generic drug company.

At the heart of the allegations was a secretly recorded 2014 phone conversation in which a Costco pharmacy director explains to a Ranbaxy drug sales representative how much the company would have to pay to “greatly reduce the likelihood of somebody eating your business.”

That rep, Tony Gagliese, complained to Ontario’s ministry of health and the pharmacists’ regulatory college, alleging Costco was requiring Ranbaxy to pay “renamed” rebates on its Ontario sales through pricey advertising services in order to circumvent the law. The advertising services included Ranbaxy’s logo being printed in clinic handouts and the Wellness Connection, a magazine published by Costco.

Costco approached the ministry in the summer of 2015 for clarity on whether the payments were appropriate, and suspended charging for its advertising services while it awaited feedback.

In its Friday statement, Costco said it co-operated fully with the government’s investigation and is “pleased” the fine “provides further guidance on the issue of rebates.”

The government’s action is not the first time Costco has been sanctioned for the payments.

At a January 2018 hearing before the Ontario College of Pharmacists, two Costco pharmacy directors — Joseph Hanna and Lawrence Varga — admitted to professional misconduct for soliciting more than $1.2 million in improper advertising services from Ranbaxy. Neither Hanna nor Varga personally pocketed any of the money, Costco said in a statement at the time.

The two pharmacists were each fined $20,000 by the regulator.

As part of that settlement, charges that Hanna and Varga allegedly accepted illegal payments from four other generic drug companies were withdrawn.

Costco said in a statement that the regulatory college’s ruling recognized that Costco pharmacies were “operating in an area of legal uncertainty as it related to the payments.”

In the notice announcing the $7.25-million fine, the province said the penalty “will serve as a guide to the pharmaceutical industry regarding compliance with rebate prohibition.”

But the whistleblower who exposed Costco’s rebate demands said the fine does little to deter other pharmacies from collecting rebates.

“It’s weak. The only thing the government is doing is taking the money back that Costco took,” Gagliese said. “If you want to send a strong message to the whole profession, the executive officer should suspend Costco’s ability to bill” Ontario’s public drug plans.

“That would be a strong message. No one would do it again,” he said.

Jesse McLean is a Toronto-based investigative reporter. Follow him on Twitter: @jesse_mclean


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Lake Louise ski resort wants fine reduced from $2M to $200,000 for chopping down endangered trees


An Alberta ski resort has appealed a Calgary judge’s $2.1-million fine for cutting down endangered trees, arguing the sentence is « grossly disproportional and demonstrably unfit. »

The Lake Louise Ski Resort in Banff National Park has asked a higher court to either stay the charges or reduce the penalty to $200,000.

One year ago, the resort pleaded guilty to charges under the Species at Risk Act and Canada National Parks Act for cutting down a stand of trees, including 38 endangered whitebark pine, along a ski run in 2013.

Last month, provincial court Judge Heather Lamoureux imposed the fine that works out to about $55,000 per tree. The maximum fine is $300,000 per tree.

In a notice of appeal filed Friday, the resort argues the trial judge « made palpable and overriding errors of fact and findings in absence of evidence and in interpreting mitigating and aggravating factors erroneously. »

In her decision, Lamoureux said the resort had risked « undermining the survival of the species in the decades to come. »

But the appeal argues there are 200 million whitebark pines in Canada and that Lamoureux erred in her assessment of the risk of harm to the species.

The resort had previously argued that cutting down 38 trees would have « zero impact » on the overall whitebark pine population in Canada.

Dan Markham, the resort’s director of brand and communications, said after the sentencing decision that the resort has taken steps — like educating staff and marking the 7,000 whitebark pines on resort land — to ensure the endangered trees remain protected.

Before the guilty plea, defence lawyer Alain Hepner had made an application to have the charges tossed out because, he argued, the case had taken too long to get to trial. Lamoureux rejected the application — and that decision is also under appeal. The resort wants the charges to be stayed. In the event the charges are not stayed, Hepner will argue for the fine to be reduced.

In this 2011 photo, whitebark pine have succumbed to mountain pine beetles through the Gros Ventre area east of Jackson Hole, Wyo. (The Associated Press)

In 2013, seven employees were doing cleanup work on Ptarmigan Ridge at the ski resort. They were trimming and removing trees, including the endangered pines, which was done without a permit.

Following DNA analysis, the trees were confirmed to be whitebark pines and the case was handed over to Parks Canada investigators. 

Prosecutor Erin Eacott had proposed the $2.1-million fine, arguing a « significant deterrent » was needed to protect the species.

Invasive disease, fire and climate change threaten the whitebark pine. 

The whitebark pine is found at high elevations in western North America and helps stabilize steep subalpine slopes.

The trees have been growing on the continent for 100,000 years and some are hundreds of years old.

The appeal will be heard in March by a Court of Queen’s Bench judge in Calgary. 


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Quebec City man who called police officer ‘douchebag’ ordered to pay $150 fine – Montreal


Following exhaustive analysis, a Quebec City municipal court judge has determined the word “douchebag” is indeed an insult, and a man who levelled it a police officer was guilty of a bylaw violation.

After a night out last June 23, Philip Blaney came across two friends sitting on the curb by a police cruiser. After asking them what was going on, Blaney turned toward the cruiser and said in French, “You big douchebag.”

READ MORE: Sweeping bylaw in Alberta town outlaws public swearing and spitting

Under a Quebec City bylaw governing peace and good order, it is prohibited to insult police officers. Blaney was issued a ticket, which he challenged in court.

In finding Blaney guilty, Judge Patrice Simard delved into dictionaries, even reproducing a passage where Stephen King used the offending word in his novel, “The Stand.”

READ MORE: People who swear are reportedly more honest than those who don’t, study

Simard concluded the word’s figurative meaning is “a person (usually a man) with an obnoxious, offensive, disgusting or contemptible behaviour.” It is roughly synonymous with idiot, he wrote.

He noted that Quebec francophones have adopted the English word.

“The term seems to specifically take aim at a strutting young man, a regular at weight rooms and tanning salons, with tattoos, bling and tight T-shirts,” Simard wrote.

During the trial, Blaney said the word is commonly used among young people to describe someone who is “full of himself.” His defence was that he was addressing it to his friends, not the police officers.

WATCH BELOW: Watch your tongue in Taber

In the decision dated Nov. 29, the judge rejected that account, noting Blaney repeated his insult when a police officer asked him what he had said.

“The defendant spoke in a loud voice, in a public place, loud enough to be heard by the police officer and anyone else who was nearby,” Simard wrote.

“In addition, the words chosen show it was clearly the police officers … who were targeted by the defendant.”

He noted the conduct of Blaney and his friends was apparently “very arrogant.” Blaney warned the officers he was going to speak to his mother who “works at the courthouse,” and one of his friends said the officers were going to be in serious trouble.

The judge imposed a $150 fine, the minimum under the municipal bylaw.


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Chez Alfred Lao Cuisine, fine cuisine laotienne


C’EST NOUVEAU – Déménagement réussi dans un décor de petite poésie urbaine pour cette excellente table du XIe qui rend hommage à la gastronomie du Laos.

Genre: déménagement sensible et très réussi dans un décor de petite poésie urbaine, où des suspensions de volières ajoutent au sentiment d’une fine cuisine comme déposée sur les ailes des épices et du Laos.

Prix: env. 40 € à la carte, menus (déj.) à 15 et 20 €. Tom Yum (potage poulet, citronnelle, galanga, maïs…): délicieusement fiévreux. Sline Dad Souk Dip (lamelles de bœuf AR, sauce huître…): attendrissant. Riz gluant noir nappé d’un flan aux œufs, lait de coco: délicat.

Avec qui? Un bourgeois-bouddhiste.

Bonne table: l’as.

Service: exquis.

Chez Alfred Lao Cuisine. 15, rue Trousseau (XIe). Tél.: 09 83 51 48 88. Tlj sf dim. et lun. Métro: Ledru-Rollin.


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