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The California Insurance Commissioner announced that Silicon Valley startup online pharmacy known as The Pill Club, agreed to pay $3.2 million after a California Department of Insurance investigation alleged it violated the California Insurance Frauds Prevention Act, by submitting false claims to insurance companies for reimbursement for telehealth visits and prescribing and dispensing FC2 female condoms that were not medically necessary.

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. It’s medication fulfillment service expanded and now delivers more than 120 brands of FDA-approved birth control and can ship medications across all 50 states.

The Pill Club is an online health company that offers these products via asynchronous and synchronous telehealth appointments. Patients fill out an online questionnaire. Nurse practitioners employed by The Pill Club would review the online questionnaires and prescribe hormonal birth control and/or FC2 female condoms based on a patient’s answers.

The Pill Club allegedly falsely billed for the nurse practitioners’ review of the online questionnaires by claiming that the review was an in-person patient visit and that the visit lasted 16-30 minutes.

Additionally, The Pill Club allegedly submitted false claims to health insurers for reimbursement for FC2 female condoms that patients did not want and were not medically necessary. The Pill Club then dispensed the FC2 female condoms from its own in-house pharmacies based out of California and Texas.

The Department of Insurance began its investigation after receiving a qui tam complaint alleging The Pill Club violated California law and had a pattern of submitting fraudulent insurance claims. The relators were represented by Anderson Berry from Arnold Law Firm and Michel Hirst of Hirst Law Group PC.

In addition, the California Attorney General separately also reached a settlement with The Pill Club for alleged violations under the California False Claims Act. His office announced a $15 million settlement against The Pill Club.

The AG 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 essential coverage mandate, which ensures that insurance providers, including Medi-Cal, cover contraception.

A three-year-long investigation by the California Department of Justice found that The Pill Club Holdings, Inc. (dba The Pill Club), formerly known as Hey Favor, Inc., defrauded Medi-Cal of millions of dollars in funding by dispensing and submitting claims for unwanted and unasked-for contraception, services not rendered

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.

The Pill Club is one of several consumer-friendly services that are combining deliveries with virtual consultation services. A clear parallel to The Pill Club is fellow women’s health startup Nurx. Best known for mail-order birth control, the company also has its sights set on other at-home health services.

Also among the bigger names in the space are Hims & Hers and Ro. Each of these well-funded brands got their start in providing sensitive men’s health products through the mail but have since launched lines for women’s health treatments and broader telehealth services like mental health counseling and primary care.