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By Hannah Parry
Associate News Editor
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An East Coast retail giant has finalized a sweeping, multimillion-dollar agreement with the federal government to resolve allegations of inflated prescription drug billing.
The $40 million settlement brings a conclusion to a years-long legal battle with Ahold Delhaize USA, sparked by a whistleblower lawsuit, that cast a spotlight on how grocery pharmacy chains report drug pricing to government-subsidized healthcare programs.
“Federal healthcare programs rely on pharmacies reporting accurate pricing information used in the applicable payment formulas,” said Assistant Attorney General Brett A. Shumate of the Justice Department’s Civil Division. “If pharmacies report inflated ‘usual and customary’ prices on claims to federal healthcare programs, the programs pay more than they should on those claims.”
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Newsweek has reached out to Ahold Delhaize USA for comment.
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What is Ahold Delhaize USA?
Ahold Delhaize USA (ADUSA) is a major powerhouse in the American supermarket industry. Headquartered in Quincy, Massachusetts, the corporation operates as a massive domestic subsidiary of Koninklijke Ahold Delhaize N.V., a Dutch multinational grocery retail company.
It was forged in July 2016 through a high-profile merger between two international grocery giants: Koninklijke Ahold N.V. (Legacy Ahold) and Delhaize Group (Legacy Delhaize). While the corporate parents unified a decade ago, their respective U.S. grocery chains continued to manage their pre-merger retail and pharmacy operations largely independently until 2018. Today, ADUSA oversees thousands of grocery stores and in-store pharmacies spanning multiple states across the eastern United States.
Which Stores Are Operated by Ahold Delhaize?
If you shop for groceries or fill prescriptions on the East Coast, chances are high that you frequent an ADUSA subsidiary. The company operates several of the most recognizable supermarket banners in the country, many of which feature in-store retail pharmacies.
The specific store chains operated under the corporate umbrella include:
- The GIANT Company (including Giant and Martin’s)
- Giant of Maryland
- The Stop & Shop Supermarket Company
- Food Lion
- Hannaford Bros.
- Bloom
- Harvey’s
- Sweetbay
What is the DOJ Settlement?
The $40 million settlement addresses allegations that Legacy Ahold and Legacy Delhaize chains overcharged government healthcare programs through their in-store prescription savings programs.
According to federal prosecutors, Legacy Delhaize stores (from 2009 to 2016) and Legacy Ahold stores (from 2013 to 2017) offered discounted drug prices to customers enrolled in their respective choice savings programs. The government contended that under the rules of Medicare Part D, Medicaid, and TRICARE, these lower, promotional prices should have been reported as the pharmacies' "usual and customary" prices. Instead, the chains allegedly failed to report the discounts, causing the taxpayer-funded healthcare programs to pay inflated amounts for routine prescriptions.
Under the terms of the agreement, ADUSA will pay $32,884,253 to the federal government—over $16.4 million of which is designated as direct restitution—plus an additional $7,115,747 to participating state governments. The settlement explicitly states that the agreement is not an admission of liability by ADUSA, nor is it a concession by the government that the claims lacked merit; rather, it was reached to avoid the expense and uncertainty of protracted litigation.
“Pharmacies are trusted with charging the contracted prescription prices to Medicare and Medicaid and not unfairly and unlawfully taking advantage of the government and the public,” said U.S. Attorney Troy Rivetti for the Western District of Pennsylvania. “This settlement confirms that the United States will take all necessary steps to bring to justice dishonest pharmacies.”
What is the False Claims Act?
The government’s case was built on the False Claims Act, a federal law dating back to the Civil War and the government's primary weapon against fraud. The act imposes significant financial liabilities on individuals and companies that knowingly submit false claims to the government for payment or approval.
A key element of this case was the law's qui tam provision. This unique mechanism allows private individuals, known as "relators" or whistleblowers, to file lawsuits on behalf of the United States government. The original lawsuit was filed in July 2018 in the U.S. District Court for the Western District of Pennsylvania by whistleblower Lawrence LaBenne. As a reward for exposing the billing discrepancies, the False Claims Act entitles the whistleblower to a percentage of the recovered funds. In this settlement, LaBenne is set to receive more than $6 million from the federal share, while his legal counsel will receive $765,000 for fees and costs.
Who is Eligible for Payout?
As this was a False Claims Act lawsuit regarding government billing rather than a consumer class-action suit, everyday grocery shoppers and pharmacy patients are not eligible to receive direct individual cash payouts. Instead, the $40 million payout serves as restitution to replenish public funds. The entities receiving the payouts are:
- The United States Treasury: On behalf of federal programs, including Medicare and the Defense Health Agency's TRICARE program (which provides healthcare to military and veterans).
- Medicaid Participating States: The individual states that choose to sign onto the companion Medicaid State Settlement Agreements. These participating states will divide the $7.1 million state portion of the settlement to recoup losses incurred by their respective state-administered Medicaid programs.
While individual shoppers won't receive a check in the mail, the settlement does include a crucial protection clause for consumers. Per the agreement, ADUSA is strictly prohibited from seeking any retroactive billing or payment adjustments from healthcare beneficiaries, their parents, or sponsors to make up for the claims covered under this dispute.
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