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

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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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McGill science group takes aim at pharmacies for selling ‘quack’ flu remedy – Montreal

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A McGill University science communication group is taking aim at a commonly available homeopathic flu remedy and questioning why pharmacies continue to sell what it calls “quack remedies.”

A survey of 150 Montreal pharmacies conducted last month by the McGill Office for Science and Society found that two-thirds of them stocked Oscillococcinum despite the fact that the product “does not work (and) cannot work according to our scientific knowledge,” reads a publication on the office’s website.

READ MORE: Montreal emergency rooms crowded as flu cases spike in time for holiday season

The product, which claims to shorten the duration of flu symptoms, was retailing for $37.99 for a box of 30 doses at a Montreal Jean Coutu pharmacy on Wednesday.

Oscillococcinum is a homeopathic pill that is made by taking the heart and liver of a duck and diluting it until there is no trace left of the organs, according to Jonathan Jarry, a science communicator who helped conduct the study.

Jarry, who has a master’s degree in molecular biology, said he decided to target Oscillococcinum in particular because he considers it the most “egregious” of homeopathic products on the market.

“Nothing in homeopathy really makes any sense or is scientific, but this one because of its high dilution factor is particularly ridiculous,” he said.

Homeopathy, which dates back to 1796, is based on the principle that “like cures like,” or the idea that a disease can be cured by ingesting a low dose of something that produces similar symptoms in a healthy person.

READ MORE: Quebec kicks off flu vaccination campaign amid worries over influenza A

Unlike other herbal or alternative medications, proponents of homeopathy believe that a product becomes more potent the more it is diluted — a principle Jarry says “violates basic laws of physics, biology and chemistry.”

Jarry pointed to overseas studies, including a review of the scientific data on homeopathy published in 2015 by Australia’s National Health and Medical Research Council, which concluded that “there are no health conditions for which there is reliable evidence that homeopathy is effective.”

WATCH: Tips for tackling cold and flu symptoms






But Boiron Canada, the makers of Oscillococcinum, says doctors, pharmacists and patients have been recommending and using the product for decades because it works.

The company provided links to two clinical trials, conducted in 1989 and 1998, which found that patients who were given the product recovered more quickly than those who ingested a placebo.

“We fully support (pharmacies’) decision to respect every Canadian’s fundamental right to choose which products best suit their individual health needs, and we will continue to provide reliable options for consideration through our homeopathic medicines,” the company said in a statement.

READ MORE: Canada having ‘substantial’ flu season so far, off to faster start than last year’s

Jarry says homeopathic products are expensive and could lead people who purchase them to falsely delay seeking needed medical treatment.

He questions why they are being sold by Quebec pharmacists, whose code of ethics requires them to protect the public by steering them towards effective treatment.

A spokeswoman for the Quebec Order of Pharmacists acknowledged that homeopathic products have no “proven scientific value” but said it would be difficult to ban them because they’re regulated by Health Canada as a type of natural health product.

Julie Villeneuve said some pharmacists choose to stock homeopathic products in order to start a dialogue with their clients, but they could face sanctions for promoting them.

“Regardless of the school of thought to which he adheres, the code of ethics is clear: The pharmacist must practice pharmacy according to scientific data,” Villeneuve wrote in a statement.

“Thus, considering the lack of scientific evidence on the effectiveness of homeopathy, a pharmacist who encourages a patient to use such products by predicting benefits would be placed in a situation of disciplinary offence.”

WATCH: Foods and supplements that may help you fight the flu





Some 8,500 homeopathic products are approved by Health Canada, which reviews them to ensure they are safe and “are supported by either scientific evidence or other references,” according to the department’s website.

In 2015, Health Canada changed its labelling requirements for homeopathic cough, cold and flu products aimed at children 12 and under, stating that makers could no longer make specific health claims unless they’re supported by scientific evidence.

READ MORE: Canada’s flu season started early this year, and might be hitting kids hard

Loblaws, the parent company of the Pharmaprix chain, said it prefers to allow patients to make their own choices, given that the products are popular and approved for sale.

“Given that these products aren’t prescribed and present no danger to health, the pharmacists-owners of our network have no reason to ban them, especially since an important proportion of their clientele appreciates and requests them,” senior communications director Johanne Heroux said in a statement.

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Is it strep throat? Pharmacies say they could give you the answer and maybe save a trip to the doctor

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‘Tis the season for colds, flu and sore throats. And anguishing over whether you — or your child — need to go to the doctor. Maybe it’s better to stay in bed — but what if it’s strep throat and antibiotics are required?

In three Canadian provinces (B.C., Alberta and Nova Scotia), you can walk into some pharmacies and get a rapid « point-of-care » strep throat test.

The pharmacist takes a throat swab, and within a few minutes, tells you whether it tested positive or negative for group A streptococcus — the bacteria that cause strep throat.

Now pharmacy owners want that test to be available across the country.

It’s a quick and easy way, they say, to confirm whether a sore throat is caused by strep bacteria or by a virus.

That’s important because only about a third of sore throats in children between five and 15 years old are caused by strep. The rest of the time it’s usually a virus, in which case antibiotics won’t do any good and shouldn’t be prescribed. 

So if the test comes back positive for strep, the pharmacist will advise you to go to the doctor and get the appropriate prescription. In Alberta, you could get the antibiotic right away, as pharmacists have prescribing authority in that province.

If the test comes back negative, « you may just need fluid and rest, which a pharmacist could advise you on, » said Sandra Hanna, vice-president of pharmacy affairs for the Neighbourhood Pharmacy Association of Canada and a pharmacist in the Toronto area.

« In the majority of cases, an antibiotic … would not be required, because it’s a viral sore throat, » she said.

Since about two-thirds of sore throats are viral and antibiotics shouldn’t be prescribed, ruling out strep infections in a pharmacy setting can help save patients unnecessary trips to the doctor’s office, says Sandra Hanna, vice-president of pharmacy affairs for the Neighbourhood Pharmacy Association of Canada and a practising pharmacist. (Neighbourhood Pharmacy Association of Canada)

The test, which costs patients about $15, allows people « to determine whether they need to go to the doctor or not, » Hanna said.

That, in turn, could help prevent the unnecessary antibiotic prescriptions which contribute to antibiotic resistance, she said.

For all those reasons, the association, which represents pharmacies (including chains such as Shoppers Drug Mart and mass merchandisers with pharmacy services such as Costco and Walmart), says strep point-of-care testing should be available across the country, and is currently lobbying to start it in Ontario.

Sounds great, right?

Not so fast, say infectious disease specialists.

When it comes to kids, point-of-care tests (also called rapid antigen tests) shouldn’t be used on their own to rule out strep throat, said Dr. Jeffrey Pernica, head of the Division of Pediatric Infectious Disease at McMaster University in Hamilton, Ont.

« These tests that they’re talking about don’t work well enough to be reliable in children. And children are the ones who are the most at risk from complications of strep throat, like rheumatic fever. And they’re the ones who get strep throat the most, » he said.

(For adults, strep throat is less common.)

When doctors suspect a patient has strep throat, they usually do a throat swab and send it off to a lab for a « throat culture test, » where the sample is left for a day or two to see if it grows into strep bacteria.

Dr. Jeffrey Pernica, head of the division of pediatric infectious disease at McMaster University, says he understands the appeal of rapid strep tests, but they shouldn’t be used in isolation when it comes to ruling out strep throat in children. (McMaster University)

That’s the « gold standard diagnostic test » for strep throat, according to the U.S. Centers for Disease Control and Prevention.

It’s also the accepted medical guideline for treating strep throat in children, said Dr. Jonathan Gubbay, a Toronto pediatrician specializing in infectious disease, as well as a medical microbiologist for Public Health Ontario.

Gubbay actually uses a point-of-care test in his clinic when he suspects a child has strep throat because he can get the result back in five or 10 minutes. If it’s positive, he can start antibiotic treatment right away.

But if it’s negative, he sends a sample to the lab for the culture test to make sure the point-of-care test wasn’t a false reading.

It’s important to make sure a strep diagnosis isn’t missed in children, Gubbay said, because although rare, it can progress into an invasive form of the disease or heighten the risk of rheumatic fever, which can damage the heart and joints.

« The sensitivity [of rapid tests] isn’t as good as we’d like, » he said.

So how reliable are they? It depends on who you ask.

The Neighbourhood Pharmacy Association says the point-of-care tests are accurate more than 90 per cent of the time. But both Gubbay and Pernica say that’s unlikely.

Dr. Jonathan Gubbay, deputy chief of medical microbiology at Public Health Ontario and a pediatric infectious disease physician, says a comprehensive physical exam of a child with a sore throat can sometimes rule out strep throat without requiring a swab at all. (Public Health Ontario)

Although studies that show such high accuracy do exist (including those cited by test manufacturers themselves), the doctors say a broader look at the research puts the number closer to 70 per cent.

Dr. Lynora Saxinger, an infectious disease specialist at the University of Alberta, also questions whether point-of-care tests are as accurate as they claim to be.

« There are lots of tests that are licensed and the packages always tell you that they’re fantastic. In the real world, they vary a lot, » she said.

Both Saxinger and Gubbay also point out that diagnosing strep goes beyond the throat swab — regardless of how the results are processed, because physicians and nurse practitioners do complete physical exams. In many cases, they’re able to rule out strep throat without even doing a swab — a level of diagnosis they’re not sure all pharmacists are equipped to provide.

But Hanna said in the provinces where point-of-care tests are in place, pharmacists do have comprehensive conversations with patients — and also guard against missed strep diagnoses.

« Tests that show a negative result in patients where the pharmacist strongly suspected them of having strep throat, based on their symptoms, were referred to a physician for further evaluation, » she said.

The manufacturers of point-of-care tests, including those for strep throat, ‘always tell you that they’re fantastic. In the real world, they vary a lot [in accuracy],’ says Dr. Lynora Saxinger, an infectious disease specialist at the University of Alberta. (University of Alberta)

The in-pharmacy tests could also save the health-care system money, the Neighbourhood Pharmacy Association says, citing a study published in the Canadian Pharmacists Journal in August. It concluded the pharmacy-based treatment saved an average of $12.47 to $24.36 per patient.

However, the study did not account for the fact that patients pay about $15 out-of-pocket for the strep test — and it was funded by Loblaw Companies Limited, which runs pharmacies and owns the Shoppers Drug Mart chain.

That raises questions for Pernica about how impartial the findings are.

« There’s a clear incentive for the drug stores to get people [in], » he said. « Because if they have strep throat, they’ve done them a service. If they don’t have strep throat, they’re still there. And I think that people will be walking out of those drug stores with cough and cold remedies. »

Regardless, Pernica said he understand the appeal of the pharmacy-based tests for patients.

« Pharmacists will make a good point in saying that sometimes it’s hard to get in to see your doctor or nurse and it’s sometimes easier for people to access pharmacies. I completely agree with that, » he said.

But he’s not convinced there’s enough independent research to back up the claims that false negatives aren’t happening — or even that there’s a cost-saving to the health-care system.

« I’m not sure of the data yet, » said Pernica. « Will people actually get treated more appropriately faster? Will the overall costs be lower? I think these are answers we don’t have yet. »


This is an excerpt from Second Opinion, a weekly roundup of eclectic and under-the-radar health and medical science news emailed to subscribers every Saturday morning. If you haven’t subscribed yet, you can do that by clicking here.

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