Costco fined $7.2 million for accepting drug company kickbacks

On February 1, the Ontario Ministry of Health announced that it had imposed a fine of over $7.2 million against CWC Pharmacies (Ontario) Limited (CWC). CWC is a division of Costco that operates 29 pharmacies in Ontario in Costco warehouses.

The fine follows a finding that Costco accepted illegal kickbacks from a generic drug manufacturer.

The Ministry’s announcement said,

Following an inspection, the Ministry determined that [Costco pharmacies] had received $7,250,748 for advertising services which the Ministry concluded violated the prohibition on rebates.

It is illegal in Ontario for a pharmacy to accept rebates, or kickbacks, from a drug manufacturer in exchange for promising to stock its brand of drugs. Studies have concluded that such rebates drive up the price of generic drugs for consumers.

The statement noted that CWC complied with all aspects of the Ministry’s inspection and acknowledged its proactive approach and cooperation.

This announcement follows an episode of The Fifth Estate aired by the CBC on January 13. This raised questions about whether McKesson Canada, Canada’s largest pharmaceutical distributor, is profiting from similar illegal kickbacks on sales of generic drugs. McKesson distributes drugs to more than 8,000 pharmacies in Canada and recently purchased more than 400 Rexall pharmacies.

The CBC described how a hidden camera investigation captured conversations with three independent pharmacists at two pharmacies who suggest McKesson is breaking the law in Ontario. One of the pharmacists related how McKesson provides pricing details and then “gives me 50 percent back.” If true, this means that for every $10 in drugs the pharmacist sells, he will be able to put $5 in his pocket. In return the pharmacist would then agree to stock the generic drugs that McKesson distributes, giving the company sales ahead of a competitor. According to the CBC, it is a practice that studies have shown dramatically inflates the price of generic drugs for Canadians who pay some of the highest generic drug prices in the world.

Through its President, Paula Keays, in a written statement provided to the CBC, McKesson denied the allegations, saying,

McKesson Canada does not pay rebates in Ontario and any assertion to the contrary is blatantly false.


Ontario Public Drug Programs (2019, Feb.1) Notice from the Executive Officer: Administrative Monetary Penalty Issued for Acceptance of Rebates [Notice]

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