A massive grocery store operator has agreed to pay $40 million to settle claims it reported inflated prescription prices to federal healthcare programs – which led the government to pay higher reimbursements than it should have.

Ahold Delhaize USA Inc. – the Quincy, Mass.-based operator of Stop & Shop, Giant, Hannaford and Food Lion – manages grocery stores with in-store pharmacies that offer prescription savings programs to members, according to the Department of Justice. 

Pharmacies with these savings programs are required to report the discounted prices as “usual and customary” prices on claims submitted to federal healthcare programs, according to federal authorities.

But instead, Ahold Delhaize’s pharmacies reported the higher, pre-discount prices when billing Medicare Part D, Medicaid and TRICARE – prompting the government to pay inflated reimbursements, the DOJ alleged.

“Federal healthcare programs rely on pharmacies reporting accurate pricing information used in the applicable payment formulas,” Brett A. Shumate, assistant attorney general of the DOJ’s Civil Division, said in a statement last week.

“If pharmacies report inflated ‘usual and customary’ prices on claims to federal healthcare programs, the programs pay more than they should on those claims.”

Of the $40 million settlement, about $32.9 million will go toward the federal government, while the rest will be paid to states participating in the case.

Lawrence LaBenne, a former pharmacist at an Ahold Delhaize supermarket in Pennsylvania and the whistleblower in the case, will receive more than $6 million as part of the federal share of the settlement.

“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 Troy Rivetti, US Attorney for the Western District of Pennsylvania. 

“This settlement confirms that the United States will take all necessary steps to bring to justice dishonest pharmacies.”

The settlement was part of a coordinated effort between the DOJ’s Civil Division, Commercial Litigation Branch, Fraud Section and the US Attorney’s Office for the Western District of Pennsylvania, along with assistance from the Health Department, Defense Health Agency and state Medicaid programs.