Grocer pays $12 million to settle drug-pricing case
March 14, 2014 | Updated: March 15, 2014 11:24am
H-E-B has paid $12 million to settle a whistleblower lawsuit accusing the San Antonio-based grocery chain of Medicaid fraud.
Since at least 2006, according to the suit, H-E-B allegedly submitted to Texas Medicaid inflated prices on thousands of claims for prescriptions it filled so the company could obtain higher reimbursements than allowed.
“The settlement relates to the interpretation of a specific regulatory requirement that applies only to the Texas Medicaid program,” H-E-B said in its statement. “While the interpretation of this regulation is not free from doubt, we agreed to resolve this matter in the best interests of our state and H-E-B.”
The settlement amount represents less than 1 percent of the business H-E-B did with Texas Medicaid during the time period, before legal fees, the company said. “There were no penalties assessed.”
HEB Commits Medicaid Fraud
The whistleblower suit was brought in 2011 in Travis County by three pharmacists who worked in other states where they filled prescriptions for H-E-B customers. The pharmacists weren’t H-E-B employees.
The state and the federal government will share about $10 million of the settlement, with the rest going to the whistleblowers and their attorneys.
The plaintiffs sued under the Texas Medicaid Fraud Prevention Act.
Whistleblowers can collect anywhere 15 percent to 25 percent of the proceeds of a case if they prevail at trial or settle.
San Antonio lawyer Glenn Grossenbacher, who represents the whistleblowers, said similar lawsuits have been filed around the country against other companies but he believes H-E-B is the first to settle.
“These frauds, quite frankly, are a little bit like viruses,” Grossenbacher said. “They get started in an industry, and because of competitive considerations, you’ll see practices like this start spreading. (H-E-B) certainly weren’t the first ones to start and they certainly weren’t the last.”
Grossenbacher declined to address H-E-B’s level of knowledge of the alleged practice, but said it’s his opinion it was corporate driven.
“This did not have to do with a particular store. It was (chain) wide,” he said.
To H-E-B’s credit, Grossenbacher added, it quickly started working with the Texas attorney general’s office — which intervened in the case — to reach a settlement.
An H-E-B spokesperson said, “Before the system change, H-E-B was passing on all savings. … . We resolved it as soon we were made aware.”
Whistleblower, or qui tam, cases are filed under seal. The suit against H-E-B was unsealed Thursday, simultaneously with the filing of the settlement agreement and the case’s dismissal.
A spokeswoman for the attorney general’s office had no comment on the case.
We “look forward to continuing as a trusted provider under the Texas Medicaid program,” H-E-B said.
Government health plans such as Medicaid reimburse providers like H-E-B for prescriptions dispensed to beneficiaries.
The amount the plans pay generally is based on the lesser of two prices: the provider’s “usual and customary price” to the public or the plan’s estimate of the pharmacy acquisition cost for the drug plus a dispensing fee.
H-E-B, though, generally charged Medicaid and other government health plans a price that was higher than the discount price the company charged its customers who purchased drugs through what’s now known as its “Rx Rewards Platinum” program.
Under the program, customers can purchase various generic drugs for $5 for a 30-day supply, the suit said. But
H-E-B reported much higher prices to government health plans.
For example, the suit listed prices reported to Texas Medicaid that ranged from $18.97 for Amoxicillin — used to treat infections — to $49.99 for cholesterol drug Pravastatin.
The three whistleblowers are Michael Yarberry of Kentucky, Robert Stamm of Georgia and Tracy Schutte of Missouri. All three graduated from St. Louis College of Pharmacy in 1992.
The case against H-E-B started when Schutte received a transfer of a prescription from a former H-E-B customer, Grossenbacher explained.
Schutte, who worked in a Walmart pharmacy, learned from an H-E-B pharmacist that the company submits higher prices to government programs and not the $5 price charged to customers.
Schutte shared the information with Stamm, who also worked at Walmart, and Yarberry. The trio “started looking out” for problems with how
H-E-B reported prices to government health plans, Grossenbacher said.
(Separately, Yarberry had filed a whistleblower suit against his employer, Kmart.)
The pharmacists reported various anecdotes from September and October 2011 of
H-E-B submitting higher prices to government programs. Their suit was filed in November 2011.
Their legal team included San Antonio attorney John E. Clark.
pdanner@express-news.net
Staff Writer Guillermo Contreras contributed to this report.
