Online Pharmacy Reaches $18.3 Million Medicaid Fraud Settlement With California

The Pill Club, an online women’s pharmacy, has reached an $18.3 million settlement with California authorities over claims it defrauded the state’s Medicaid program by prescribing birth control pills without adequate consultation and shipping tens of thousands of female condoms to customers who didn’t want them. 

Attorney General Rob Bonta announced the agreement Tuesday, a day after a state court unsealed a whistleblower complaint against The Pill Club, which markets convenient reproductive health services to women nationwide. The whistleblowers’ complaint alleges the Silicon Valley company also bilked private health insurers in at least 38 states, including California. 

The Pill Club agreed to pay $15 million to the state Department of Justice and $3.3 million to the Department of Insurance. California officials said they believe it’s the first such enforcement action against the company. The Pill Club formed in 2016 as an online-only pharmacy distributing birth control pills and other contraceptives. It serves more than 3 million customers nationwide, according to its website. 

Liz Meyerdirk, The Pill Club’s CEO, said in a statement that she is “glad to have the opportunity to resolve these issues and to bring our full focus back to expanding access to contraceptive care for all who need it.” The company, which denied wrongdoing, noted that California is not requiring it to change its business practices. However, it said it has improved its billing and taken steps to make sure customers receive only products they request. 

The whistleblower complaint was filed in 2019 by two of the company’s former nurse practitioners, Happy Baumann and Cindy Swintelski. They alleged the company’s nurse practitioners prescribed birth control pills and related products without proper supervision by medical doctors, in violation of California law, as The Pill Club “increased its profits while putting women’s health in danger.” 

Investigators also found the company sent customers “massive quantities” of the female condoms, sometimes an entire box containing 96 of the barriers, for which the company was reimbursed as much as $2,253.80 for a single delivery. 

The whistleblowers and their attorneys will receive nearly $4.6 million from the two state settlements. Justice Department officials said the settlement will cover all the losses to Medi-Cal, California’s Medicaid program. 

The whistleblower complaint alleges nurse practitioners “rubber-stamped” birth control prescriptions, spending from 15 seconds to a few minutes on each case. 

The company billed taxpayers for multiple half-hour live or telehealth counseling sessions, but in truth, investigators and the whistleblowers said, the company’s nurse practitioners had no such interaction with customers. Instead, customers filled out a 23-question health history questionnaire, or “self-screening tool,” on its website. Nurse practitioners looked at the questionnaire, wrote a prescription, the products were sent to the customer, and Medi-Cal was billed. 

But the company’s highest profits came from the female condoms, the Department of Justice said in sharing details from its 3-year investigation exclusively with KHN. Not only do they bring a high reimbursement rate, but the company also billed Medi-Cal more than 250% of the retail price on average, investigators found. 

The problem for The Pill Club was that few of its customers had any interest in female condoms. 

A pre-checked box at the bottom of the company’s website sign-in page said customers would receive additional items—including the condoms—free if they were covered by their insurance, investigators said. The whistleblower complaint says the deliveries would come with “chocolate and sample gift items.” 

Further, investigators said, the company would bundle the condoms with customers’ shipments of monthly hormonal birth control pills and any order for emergency contraception, often known as the “morning-after pill,” both of which carry low profit margins and reimbursement rates. 

But the company sent them anyway, by the dozens, by making it difficult or impossible for customers to opt out, investigators with the state’s Division of Medi-Cal Fraud and Elder Abuse discovered. In all, investigators found nearly 37,000 such condom claims filed for reimbursement through Medi-Cal. 

Even after customers told the company to stop, it kept sending the condoms—and billing Medi-Cal for them, investigators said. The settlement says the company also billed Medi-Cal for emergency contraceptives “in quantities in excess of medical necessity,” and for prescriptions sent to California customers by a Texas-based pharmacy that wasn’t licensed to provide them to California patients. 

Bonta, the state attorney general, said the company “siphoned off Medi-Cal funding intended to help vulnerable communities access essential health care.”