Walgreens Pays $7.9 Million to Settle 'Whistleblower' Lawsuits Alleging Kickbacks to Induce Transfer of Prescriptions

LOS ANGELES – Walgreens, the largest drugstore chain in the nation, has paid the United States and participating governments $7.9 million to settle allegations that it paid kickbacks to illegally induce the transfer of prescriptions to its pharmacies.

The settlement was announced today when the federal and state governments learned that federal judges had unsealed allegations contained in two “whistleblower” lawsuits filed against Walgreens. The federal lawsuits were filed in Los Angeles and Detroit.

The settlement resolves allegations that Walgreens illegally offered gift cards and other incentives as kickbacks to customers covered by government-funded health insurance programs to induce the transfer of prescriptions from other stores to its pharmacies. These kickbacks resulted in the governments paying for unneeded prescriptions, small-business pharmacies unfairly losing customers to Walgreens, and patients making decisions based upon monetary incentives rather than legitimate health care needs. The federal health care programs defrauded by the illegal kickbacks include Medicare, Medicaid, TRICARE and FEHBP (Federal Employees Health Benefits Program).

“This settlement vindicates and protects the interests of consumers throughout the nation by ensuring that they remain free from undue influence exerted by large retail chains when they make important individual decisions about which pharmacies to entrust their own individual health care,” said United States Attorney André Birotte Jr.

Stuart F. Delery, the Acting Assistant Attorney General for the Civil Division of the Department of Justice, said, “This case represents the government’s strong commitment to pursuing improper practices in the retail pharmacy industry that have the effect of manipulating patient decisions.”

The $7.9 million settlement includes a $646,896 payment to the participating states because both federal and state governments fund Medicaid programs. As part of the settlement, Walgreens did not admit wrongdoing.

The governments became aware of these allegations when two “whistleblowers” – Cassie Bass and Jack Chin – filed lawsuits under the qui tam provisions of the federal and state False Claim Acts. Pursuant to the provisions of these laws, a portion of the settlement amount will be paid to the whistleblowers, who will split $1,277,172 for their role in uncovering the illegal kickback scheme and filing the lawsuits. Ms. Bass learned of the misconduct while working as a pharmacy technician at Walgreens in Detroit, and Mr. Chin discovered the scheme as an independent pharmacist in Florida.

The federal share of the settlement is $7,298,124.

“This settlement makes clear that corporations seeking increased profits over their patients’ needs will pay a substantial price,” said Daniel R. Levinson, Inspector General for the Department of Health and Human Services. “Violating federal health care laws, as Walgreens allegedly did by offering incentives for new business, cannot be tolerated.”

These cases were investigated jointly by the United States Attorney’s Offices for the Central District of California and the Eastern District of Michigan, the Commercial Litigation Branch of the United States Justice Department’s Civil Division, the National Association of Medicaid Fraud Control Units, and the United States Department of Health and Human Services - Office of Inspector General.