Costco execs to face hearing over kickback allegations

Two Costco pharmacy directors face a disciplinary hearing over an alleged kickback scheme—a saga that’s made front page headlines.

The Ontario College of Pharmacists has been investigating Joseph Hanna and Lawrence Varga over accusations they accepted rebates from drug manufacturers while engaged in the practice of pharmacy in their roles with the retailer.

While drug manufacturers commonly pay pharmacies to stock product in other provinces, Ontario banned the practice, directly or indirectly, in 2006.

Now, the regulator’s inquires, complaints and reports committee has found sufficient evidence to refer the allegations on to its discipline committee, which will determine if the pharmacists did indeed engage in professional misconduct.

According to the college’s summary of allegations, Hanna and Varga are accused of unlawfully accepting payments from up to five drug companies, including Ranbaxy, Teva Canada, Pharmascience, Mylan and Actavis.

The college first launched its investigation following a complaint a generic drug maker made in 2015.

As reported in the Toronto Star, Tony Gagliese, a sales rep for Ranbaxy, filed the complaint with the college accusing Costco of demanding unlawful rebates—nearly $1.3 million.

The complaint named Hanna and Varga.

Costco denies that the payments demanded from Ranbaxy were rebates and expects the college will come to the same conclusion.

“We are confident that the pharmacies, Mr. Varga and Mr. Hanna have acted appropriately and in accordance with current Ontario guidelines/regulations,” Costco spokesperson Ron Damiani said in a statement provided to the Star.

But Gagliese alleges that Costco renamed the rebates on its Ontario sales as ‘clinic support or marketing initiatives’ in order to circumvent the law, according to the Star.

A secretly recorded phone conversation between the sales rep and Hanna, Costco’s director of Rx Buying, reveals the pharmacist explaining how much the drug company would have to pay to “greatly reduce the likelihood of somebody eating your business.”

The Star, which obtained a copy of the recording, has more in depth details about their conversation.

Costco’s lawyer denies Gagliese’s accusations, stating in a written response that any rebates were based on purchases for locations outside of Ontario.

The lawyer also states that $1.22 million paid by Ranbaxy was advertising fees not connected with the purchase and sale of a specific drug product.

The college has not outlined the total amount Costco is alleged to have received in improper payments.

No date has been set yet for the disciplinary hearing and the accusations have not been proven in court.

With files from Sonya Felix