Feeling Deflated From Inflated Prices: Ahold Delhaize Pays $40M In First Drug Pricing Fraud Case Settled Under The Second Trump Administration

Earlier this month, the U.S. Department of Justice (DOJ) announced a $40 million settlement with Ahold Delhaize USA, Inc. (Ahold Delhaize) to resolve allegations that the company violated the False Claims Act (FCA) by reporting inflated “usual and customary” prescription drug prices on claims submitted to Medicare Part D, Medicaid, and TRICARE. This settlement reflects DOJ’s increasing focus on drug pricing fraud in state and federal healthcare programs, which DOJ identified as a priority enforcement area when it announced its FCA Working Group with the U.S. Department of Health and Human Services (HHS) last year. Notably, although DOJ flagged drug, device, and biologics pricing as an enforcement priority—including arrangements for discounts, rebates, service fees, and formulary placement and price reporting—this is the first drug pricing-related FCA settlement DOJ has announced since the Working Group's establishment.

Usual and Customary Pricing Background

Under Medicare Part D, Medicaid, and TRICARE, pharmacy reimbursement formulas use a pharmacy’s “usual and customary” price for a particular drug as the cap on the amount of money the government will reimburse for that drug. The usual and customary price generally means the lowest price a pharmacy routinely offers the general public for a given prescription drug, including prices offered through membership or discount programs. Where a pharmacy operates a prescription savings program that offers enrolled members discounted prices on drugs, those discounted prices typically must be reported as the usual and customary price on claims submitted to federal healthcare programs.

The Alleged Inflated Pricing Settlement

Ahold Delhaize operates several large supermarket chains with in-store retail pharmacies across the United States, historically including Giant, Martin’s, Stop & Shop, Food Lion, Hannaford, Bloom, Harvey’s, and Sweetbay. The government alleged that the Ahold Delhaize entities operated prescription savings programs that offered discounted drug prices to enrolled members but failed to report those discounted prices as their usual and customary prices when submitting claims to Medicare Part D, Medicaid, and TRICARE. According to the government, the failure to do so resulted in inflated reimbursement from these healthcare programs.

Compliance Takeaways

The Ahold Delhaize settlement offers several practical lessons for pharmacies and retailers participating in federal healthcare programs:

• Discount and savings programs can reset your usual and customary price. When a pharmacy makes discounted prices routinely available to savings-program members, the government’s position is that those prices may become the usual and customary price that caps federal reimbursement. A “membership” or “cash discount” label does not necessarily insulate the price from usual and customary reporting obligations.
• The analysis is fact-specific and program-specific. DOJ’s allegations turned on “the features and operations of those savings programs” measured against each program’s requirements—Medicare Part D, Medicaid, and TRICARE—including applicable contractual requirements with Part D plan sponsors and PBMs. Reporting practices should be evaluated against each relevant program and contract, not a single general standard.
• Liability can follow legacy conduct through corporate transactions. The covered conduct dates back to 2009 and spans a 2016 merger, with liability attaching to legacy operations predating the current corporate structure. Acquirers and post-merger compliance teams should treat usual and customary reporting practices—including those of predecessor entities—as a diligence and integration priority.

Conclusion

For pharmacies and retail operators participating in Medicare Part D, Medicaid, and TRICARE, the Ahold Delhaize settlement underscores the importance of carefully evaluating usual and customary price reporting practices. In particular, organizations that offer prescription savings programs, membership discount programs, or other discounted cash pricing arrangements should analyze whether those prices may bear on their usual and customary price reporting obligations under federal and state healthcare programs and applicable contractual arrangements with Part D plan sponsors and pharmacy benefit managers.

This settlement also reflects the government’s interest in pharmacy pricing and reimbursement practices as an FCA enforcement priority. As the first drug-pricing-related FCA settlement announced following the establishment of the DOJ-HHS False Claims Act Working Group, it may provide an early indication of the government’s enforcement direction in this area. Whether it proves to be an isolated enforcement action or the start of a broader trend remains to be seen. As always, we at Qui Notes will continue to monitor and provide updates and analysis for all the latest issues related to FCA enforcement.