Attorney General Bonta Announces $15 Million Settlement Against Silicon Valley Startup Online Pharmacy for Medi-Cal Fraud Scheme

An investigation by the California Department of Justice found that The Pill Club defrauded Medi-Cal of millions of dollars in funding by dispensing and submitting claims for unwanted and unasked-for contraception, services not rendered 

OAKLAND — California Attorney General Rob Bonta today announced a $15 million settlement against The Pill Club, a Silicon Valley startup operating an online pharmacy for birth control and contraceptives. The settlement resolves allegations that the company unlawfully billed California’s Medicaid program, Medi-Cal, millions of dollars in public funds in an allegedly fraudulent scheme that exploited the Affordable Care Act's (ACA) essential coverage mandate, which ensures that insurance providers, including Medi-Cal, cover contraception. The investigation by the California Department of Justice (DOJ) found that The Pill Club defrauded Medi-Cal of millions of dollars by dispensing and reimbursing for costly products that customers had not asked for, and submitting reimbursements for ineligible services and prescriptions.

“The Pill Club unacceptably siphoned off Medi-Cal funding intended to help vulnerable communities access essential healthcare,” said Attorney General Bonta. “I am grateful to the whistleblowers and our investigators who were instrumental in holding The Pill Club accountable. At the California Department of Justice, we fight every day to protect and expand access to healthcare. We will not tolerate companies who attempt to unlawfully enrich themselves at Medi-Cal's expense.” 

California’s Medi-Cal program is funded by the state and federal governments, and is intended to help people with limited income and resources get the healthcare they need. After the Affordable Care Act (ACA)'s essential coverage mandate went into effect in 2010, Californians who depended on Medi-Cal were guaranteed insurance coverage for birth control and contraceptives. 

The Pill Club was formed in 2016, offering California patients, including Medi-Cal beneficiaries, an online-only prescription and delivery service for reproductive care-related products. The DOJ’s Division of Medi-Cal Fraud and Elder Abuse (DMFEA) found over a three-year-long investigation that the company defrauded the Medi-Cal program in several ways, including by: 

• Billing for services it had never rendered. For example, investigators found multiple instances in which the company had submitted claims for 30-minute face-to-face counseling sessions when in reality, The Pill Club's nurse practitioners had no direct or real-time contact with those patients. Investigators found as many as 3,000 Medi-Cal claims submitted by the Pill Club for purported medical services that were actually never rendered.

• Dispensing enormous quantities of costly products its customers had not asked for. For example, DOJ investigators found that The Pill Club dispensed shipments of FC2 female condoms, to multiple women who were Medi-Cal beneficiaries, but who had no interest in receiving or using these devices. The company billed Medi-Cal for these products at prices that were, on average, 250% higher than the retail price. FC2 would be sent out as part of a 'bundle' when patients requested emergency contraception. Patients could not easily opt out of the bundle. In addition, the Pill Club regularly sent the maximum quantity of FC2 to new patients and with refills. Medi-Cal beneficiaries were sent massive quantities of FC2 — sometimes as many as 96 were dispensed at a time — and The Pill Club was in turn reimbursed as much as $2,253.80 for a single prescription delivery. The DOJ investigation found The Pill Club continued sending many patients large quantities of the condoms and submitting Medi-Cal claims for the condoms, even after the patients asked to stop receiving them. 

The $15 million settlement recovers damages and civil penalties under the California False Claims Act. It recovers all losses, and ensures full restitution to the Medi-Cal program. 

DMFEA protects Californians by investigating and prosecuting those who defraud the Medi-Cal program. These settlements are made possible only through the coordination and collaboration of governmental agencies, as well as the critical help from whistleblowers who report incidences of abuse or Medi-Cal fraud at oag.ca.gov/dmfea/reporting 

DMFEA receives 75% of its funding from HHS under a grant award totaling $53,792,132 for federal fiscal year 2022-2023 The remaining 25% is funded by the State of California. The federal fiscal year is defined as October 1, 2022, through September 30, 2023. 

The claims resolved by the settlement are allegations only, and there has been no determination of liability. 

A copy of the settlement agreement can be found here.