Inspections, Compliance, Enforcement, and Criminal Investigations

March 27, 2012: United States Department of Justice and the State of Washington Announce Successful Health Care Fraud Settlement with Bates Drug Stores in Spokane

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Food and Drug Administration
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U.S. Department of Justice Press Release


For Immediate Release
March 27, 2012

United States Attorney
Eastern District of Washington
Contact: Joseph Harrington
First Assistant U.S. Attorney
(509) 353-2767


Spokane – Today, Joseph H. Harrington, Attorney for the United States, Acting Under Authority Conferred by 28 U.S.C. 515, announced that the United States Department of Justice (on behalf of the U. S. Department of Health and Human Services, which administers the Medicare program) and the State of Washington (on behalf of the Washington State Health Care Authority, which administers the Medicaid program) have reached a civil settlement with Bates Drug Stores, Inc. in the amount of $602,271.14.

As set forth in the settlement agreement, the United States and the State of Washington allege that, between May 1, 2006 and January 1, 2011, Bates dispensed drug units which were billed to and paid for by Medicare and Medicaid. Those unused drug units, however, were later returned to Bates and re-dispensed and re-billed to Medicare and Medicaid. The United States and the States of Washington allege that Bates did not follow the Medicare and Medicaid billing requirements and “double-billed” for the same drugs, resulting in false claims being submitted to Medicare and Medicaid.

The settlement agreement secures the United States' agreement not to file an affirmative civil enforcement lawsuit against Bates based on alleged false and fraudulent Medicare billings under the False Claims Act, Title 31 United States Code, Sections 3729 - 3733. Under the False Claims Act, a party that submits false and fraudulent claims to the Medicare program can be held liable for triple the amount paid to the party based on such claims and can be subjected to civil penalties of $5,500 to $11,000 for each false claim submitted to the program. By way of the settlement agreement Bates avoided these potential penalties and worked with the United States and the State of Washington to obtain a mutually agreeable resolution of the alleged double billing. The Department of Justice has employed the False Claims Act to recover more than $6.6 billion since January 2009 in cases involving fraud against federal health care programs. The Justice Department's total recoveries in False Claims Act cases since January 2009 are more than $8.8 billion.

“When pharmacies double-bill Medicaid for drugs, they're double-billing taxpayers,” said Washington State Attorney General Rob McKenna. “Our Medicaid Fraud Control Unit is proud to work with the Department of Justice to return funds to a program providing health care to adults and children who would otherwise be without it.”

“Although only a small percentage of our providers would defraud the program, Washington State Medicaid takes program integrity very seriously,” said Doug Porter, Director of the state Health Care Authority. “Washington State is a national leader in maintaining audit systems that ensure we are fully accountable to taxpayers and policymakers for the money we spend on our most vulnerable populations.”

Joseph H. Harrington said: “This is yet one more example of the successful collaborative efforts by our state and federal partners in investigating, combating, and resolving health care fraud in the Eastern District of Washington.”

The settlement with Bates Drug Stores, Inc. was the result of a coordinated effort among the United States Attorney's Office for the Eastern District of Washington, the United States Department of Health and Human Services Office of Inspector General and Office of Counsel to the Inspector General, the State of Washington Attorney General's Medicaid Fraud Control Unit, the State of Washington Health Care Authority, and the United States Food and Drug Administration.

This matter was handled by Assistant United States Attorney K. Jill Bolton and Assistant Washington State Attorney General Danette Allen.

Page Last Updated: 01/28/2015
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