Rite Aid 2016 Annual Report Download - page 32

review of the appellate court’s decision with the California Supreme Court, which petition was denied
in August 2014. Proceedings in the Hall case are stayed pending a decision by the California Supreme
Court in two similar cases. That decision was rendered on April 4, 2016. The Company is conferring
with counsel about next steps in the litigation. A further status conference in the case is scheduled for
May 13, 2016. With respect to the California Cases (other than Chase and Scherwin and Kyle), the
Company, at this time, is not able to predict either the outcome of these lawsuits or estimate a
potential range of loss with respect to said lawsuits.
The Company was served with a Civil Investigative Demand Subpoena Duces Tecum dated
August 26, 2011 by the United States Attorney’s Office for the Eastern District of Michigan. The
subpoena requests records regarding the relationship of Rite Aid’s Rx Savings Program to the reporting
of usual and customary charges to publicly funded health programs. In connection with the same
investigation, the Company was served with a Civil Subpoena Duces Tecum dated February 22, 2013 by
the State of Indiana Office of the Attorney General requesting additional information regarding both
Rite Aid’s Rx Savings Program and usual and customary charges. The Company has responded to both
of the subpoenas. To enable the parties to discuss a possible resolution, the Medicaid Fraud Control
Units of the several states, commonwealths and the District of Columbia and Rite Aid have entered
into an agreement tolling the statute of limitations until October 7, 2015. The parties agreed to extend
the tolling agreement until April 7, 2016. At this stage of the proceedings, Rite Aid is unable to predict
the outcome of any review by the government of such information.
On April 26, 2012, the Company received an administrative subpoena from the U.S. Drug
Enforcement Administration (‘‘DEA’’), Albany, New York District Office, requesting information
regarding the Company’s sale of products containing pseudoephedrine (‘‘PSE’’). In April 2012, it also
received a communication from the U.S. Attorney’s Office (‘‘USAO’’) for the Northern District of New
York concerning an investigation of possible civil violations of the Combat Methamphetamine Epidemic
Act of 2005 (‘‘CMEA’’). Additional subpoenas were issued in 2013, 2014, and 2015 seeking broader
documentation regarding PSE sales and recordkeeping requirements. Assistant U.S. Attorneys from the
Northern and Eastern Districts of New York and the Southern District of West Virginia are currently
investigating, but no charges have been filed. On September 2, 2015 and March 11, 2016, the Company
received grand jury subpoenas from the U.S. District Court for the Southern District of West Virginia
seeking additional information in connection with the investigation of violations of the CMEA and/or
the Controlled Substances Act (‘‘CSA’’). Violations of the CMEA or the CSA could result in the
imposition of administrative, civil and/or criminal penalties against the Company. The Company is
cooperating with the government and continues to provide information responsive to the subpoenas.
The Company has entered into a tolling agreement with the USAOs in the Northern and Eastern
Districts of New York and entered into a separate tolling agreement with the USAO in the Southern
District of West Virginia. Discussions are underway to resolve these matters with those USAOs, but
whether an agreement can be reached and on what terms is uncertain. While the Company’s
management cannot predict the outcome of these matters, it is possible that the Company’s results of
operations or cash flows could be materially affected by an unfavorable resolution. At this stage of the
investigation, Rite Aid is unable to predict the outcome of the investigation.
In January 2013, the DEA, Los Angeles District Office, served an administrative subpoena on the
Company seeking documents related to prescriptions by a certain prescriber. The USAO, Central
District of California, also contacted the Company about a related investigation into allegations that
Rite Aid pharmacies filled certain controlled substance prescriptions for a number of practitioners after
their DEA registrations had expired or otherwise become invalid in violation of the federal Controlled
Substances Act and DEA regulations. The Company responded to the administrative subpoena and
subsequent informal requests for information from the USAO. The Company met with the USAO and
DEA in January 2014 and is involved in ongoing discussions with the government regarding this matter.
The Company has entered into a tolling agreement with the USAO. The Company recorded a legal
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