Walgreens Agrees to $296M Settlement in Healthcare Fraud Cases

January 25, 2019 - Walgreens has agreed to pay a total of $296.2 million in settlements for two separate healthcare fraud cases.

The first settlement, approved on January 16, 2019, requires the pharmacy chain to pay $209.2 million to resolve allegations that it improperly billed Medicare, Medicaid, and other federal healthcare programs for hundreds of thousands of insulin pens that it knowingly dispensed to beneficiaries who did not need them.

The complaint alleges that Walgreens configured its electronic pharmacy management system to prevent pharmacists from dispensing less than a full box of five insulin pens, even when patients didn’t need that much insulin.

Moreover, when a full box of insulin pens exceeded the federal healthcare program’s limit on the total number of daily doses that could be dispensed and reimbursed, Walgreens falsely stated that the total days of supply did not go over the limit in its reimbursement claims.

This resulted in federal programs paying Walgreens millions of dollars in unneeded insulin, and in valuable medications being wasted.

“Medicare and Medicaid provide essential healthcare coverage to millions of people across this country,” said Manhattan US Attorney Geoffrey S. Berman.

“The financial integrity of these programs depends on truthful and accurate billing by pharmacies like Walgreens. Overbilling and improper billing of Medicare and Medicaid unduly burden taxpayers and put the solvency of these vital healthcare programs at risk. This Office will hold healthcare providers to account when they fail to deal honestly with federal programs.”

The insulin pens settlement requires Walgreens to pay approximately $168 million to the United States, and approximately $41.2 million to state governments.

“Walgreens engaged in practices that undermined the integrity of the Medicare and Medicaid programs, compromised patient care, and wasted taxpayer dollars,” said HHS-OIG Special Agent in Charge Scott J. Lampert. 

“Along with our law enforcement partners, HHS-OIG will continue to protect the individuals that depend on federally funded health care programs, and ensure that companies that do business with those programs do so in an honest fashion.”

The second settlement, approved on January 15, 2019, requires Walgreens to pay $60 million to resolve allegations that the company overbilled Medicaid by failing to disclose to and charge Medicaid the lower drug prices that Walgreens offered to the public through a discount program.

The complaint in this case alleges that Walgreens was operating a program called the Prescription Savings Club (PSC), which gave discounts to customers who ordered drugs from Walgreens. Moreover, Walgreens didn’t disclose the discounted drug prices when it sought reimbursement from Medicaid, resulting in Medicaid programs paying Walgreens significantly more in reimbursements.

The settlement requires Walgreens to pay approximately $32 million to the United States and roughly $28 million to state governments.

In connection with both settlements, Walgreens has entered into a Corporate Integrity Agreement with HHS-OIG. The Agreement reaches across Walgreen’s retail and specialty pharmacies that bill federal health programs, and requires broad oversight and multi-site claims reviews conducted by an Independent Review Organization to ensure adherence to federal program requirements.

These settlements come on the heels of a particularly bad year for healthcare fraud. The Department of Justice (DOJ) recently announced that $2.5 billion of the total $2.8 billion recovered under the False Claims Act can be attributed to fraud and improper claims from providers during fiscal year 2018.

2018 marked the ninth consecutive year that civil healthcare fraud settlements and judgments have topped $2 billion, DOJ noted. It was also the year of the largest healthcare fraud takedown to date, with OIG and DOJ charging over 600 individuals involved in fraud schemes that cost Medicare and Medicaid $2 billion in losses.

Officials expect that the cases against Walgreens will set a precedent for major healthcare companies in the future.

“This settlement sends a clear message to pharmaceutical chains to follow the law. Pharmacies that attempt to take advantage of federal benefit systems will be pursued by the Special Agents of the U.S. Postal Service Office of Inspector General, their law enforcement partners, and the U.S. Attorney’s Office,” said USPS-OIG Special Agent in Charge Matthew Modafferi.