Preet Bharara, the United States Attorney for the Southern District of New York, Scott J. Lampert, Special Agent in Charge of the New York Office of the U.S. Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), and Craig Rupert, Special Agent in Charge of the Northeast Field Office of the Defense Criminal Investigative Service, Department of Defense, Office of Inspector General (“DoD-OIG”), announced today a $50 million settlement in a civil fraud lawsuit against WALGREEN CO. (“WALGREENS”), a nationwide retail pharmacy chain that owns and operates thousands of retail pharmacies throughout the United States. The settlement resolves claims that WALGREENS violated the federal Anti-Kickback Statute (“AKS”) and False Claims Act (“FCA”) by enrolling hundreds of thousands of beneficiaries of government healthcare programs (“government beneficiaries”) in its Prescription Savings Club program (“PSC program”). Specifically, the Government’s Complaint alleges that Walgreens violated the AKS and FCA by providing government beneficiaries with discounts and other monetary incentives under the PSC program, in order to induce them to patronize WALGREENS’ pharmacies for all of their prescription drug needs. The Complaint further alleges that WALGREENS understood that allowing government beneficiaries to participate in the PSC program was a violation of the AKS, but that it nevertheless marketed the program to government beneficiaries and paid its employees bonuses for each customer they enrolled in the program, without verifying whether the customers were government beneficiaries. The settlement will also resolve numerous state law civil fraud claims.

U.S. District Court Judge J. Paul Oetken has approved a settlement agreement to resolve the Government’s claims against WALGREENS. Under the settlement, WALGREENS is required to pay approximately $46.21 million to the United States and has admitted and accepted responsibility for conduct alleged in the Government’s Complaint. Further, as part of the settlement, WALGREENS will pay approximately $3.79 million to resolve the state law civil fraud claims.

Manhattan U.S. Attorney Preet Bharara said: “Recognizing that it was a violation of the Anti-Kickback Statute to enroll government beneficiaries in its discount program, Walgreens nonetheless marketed the program to government beneficiaries and incentivized its employees to enroll customers in the program, regardless of whether they were government beneficiaries. As a result, Walgreens ended up unlawfully enrolling hundreds of thousands of government beneficiaries. With today’s settlement, Walgreens is being made to pay $50 million and has admitted to its conduct.”

HHS-OIG Special Agent in Charge Scott J. Lampert said: “The sheer scope of this nationwide kickback scheme is shocking. Walgreens admits to having paid bonuses to employees for enrolling customers in its prescriptions savings program without verifying whether the customers were Medicare or Medicaid beneficiaries, despite stated company policy against enrolling such beneficiaries based on federal statutes. Today’s settlement is a message to other retailers that there will be consequences for such conduct.”

DoD-OIG Special Agent in Charge Craig Rupert said: “This settlement is evidence of the continuing efforts of the Defense Criminal Investigative Service and our law enforcement partners to identify, investigate, and prosecute significant threats to the DoD health care system. DCIS will continue to aggressively investigate allegations of fraud and abuse harmful to U.S. taxpayers and the Department of Defense.”

As alleged in the Complaint and set forth in the parties’ Settlement Agreement, both of which have been filed in Manhattan federal court:

WALGREENS launched the PSC program in 2007. Throughout the period January 2007 through December 2010, the PSC program provided members with discounts on thousands of brand-name and generic drugs, as well as a 10 percent rebate on all WALGREENS’ branded products, including household products, baby-care products, most grocery items, and non-prescription medications. WALGREENS intended these lower drug prices and other monetary benefits to be an inducement to its existing and potential customers to cause them to patronize WALGREENS for all of their pharmacy needs. WALGREENS hoped that by offering these significant benefits to its customers, it would prevent them from taking their pharmacy business to WALGREENS’ competitors.

WALGREENS recognized that allowing government beneficiaries to participate in the PSC program would violate the AKS. Specifically, WALGREENS recognized that the features of the PSC program that made it attractive to its customers generally would constitute an illegal kickback when provided to government beneficiaries, as such features would induce government beneficiaries to patronize WALGREENS for all of their prescription medication needs, including those paid for in whole or in part by government healthcare programs. Accordingly, WALGREENS consistently maintained in its published materials regarding the PSC program that government beneficiaries were ineligible to participate in the program.

Notwithstanding WALGREENS’ understanding that allowing government beneficiaries to participate in the PSC program would violate the AKS, WALGREENS consistently marketed the PSC program to government beneficiaries. WALGREENS also incentivized its employees to enroll customers in the PSC program, regardless of whether they were government beneficiaries. For example, from May 2008 through August 2010, WALGREENS paid its employees from $1 to $5 for each customer they enrolled in the PSC program. In making these incentive payments, WALGREENS did not check whether the customers who had been enrolled were government beneficiaries.

Consequently, during the period January 2007 through December 2010, WALGREENS enrolled hundreds of thousands of government beneficiaries in the PSC program. These government beneficiaries included beneficiaries of the Medicare, Medicaid and TRICARE programs. Thereafter, from January 2011 through December 2015, while WALGREENS’ internal company policy continued to preclude the enrollment of government beneficiaries in the PSC program, WALGREENS continued to enroll such beneficiaries in the program.

As part of the settlement, WALGREENS admitted, acknowledged, and accepted responsibility for the following conduct:

• During the period January 1, 2007 through December 31, 2010, WALGREENS’ published materials regarding the PSC program stated that persons receiving benefits from the Medicare and Medicaid programs were not eligible to participate in the PSC program.

   

• In October 2007, WALGREENS identified approximately 13,000 PSC program members who it had determined were beneficiaries of the Medicare and Medicaid programs, and it removed those individuals from the PSC program. In an internal news release informing its employees of this removal, WALGREENS stated that “any customer who ha[d] any type of 3rd party coverage with a Medicare or Medicaid plan was removed from the [Prescription] Savings Club database,” and that “th[is] removal was necessary to comply with State/Federal regulations.”

   

• Subsequent to October 2007 and continuing through December 31, 2010, internal WALGREENS documents reflect that its stated policy to exclude Medicare and Medicaid beneficiaries from the PSC program was based on, among other things, the prohibition on offering inducements to beneficiaries of government healthcare programs reflected in the federal AKS and corresponding state anti-kickback laws.

   

• Notwithstanding its stated policy to exclude Medicare and Medicaid beneficiaries from the PSC program, subsequent to October 2007 and continuing through December 31, 2010, WALGREENS enrolled hundreds of thousands of Medicare and Medicaid beneficiaries in the PSC program.

   

• Between November 2007 and December 31, 2010, WALGREENS also enrolled more than 10,000 TRICARE beneficiaries in the PSC program.

   

• Prior to December 31, 2010, pharmacists at WALGREENS’ stores nationwide made tens of thousands of notations in WALGREENS’ internal customer database reflecting that specific Medicare, Medicaid, and TRICARE beneficiaries had been enrolled in the PSC program and were using the PSC program to purchase some of their prescription drugs.

   

• At various times between November 2007 and December 31, 2010, WALGREENS paid its employees a bonus of between $1 and $5 for each customer they enrolled in the PSC program. When paying these bonuses, WALGREENS did not verify that the customers its employees had enrolled in the PSC program were not government beneficiaries.

   

• Prior to December 31, 2010, WALGREENS did not have effective mechanisms in place to block government beneficiaries from enrolling in the PSC program or to monitor adequately whether government beneficiaries had been allowed to enroll in the PSC program, to ensure compliance with its stated policy to exclude such beneficiaries from the PSC program. As a result, hundreds of thousands of government beneficiaries were enrolled in the PSC program.

   

• Subsequent to December 31, 2010, and continuing through December 31, 2015, WALGREENS’ internal company policy continued to preclude the enrollment of government beneficiaries in the PSC program, and WALGREENS continued to enroll such beneficiaries in the program.

   

In connection with the filing of the lawsuit and settlement, the Government joined a private whistleblower lawsuit that had previously been filed under seal pursuant to the False Claims Act.

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Mr. Bharara thanked HHS’s Office of the Inspector General, DOD’s Office of the Inspector General, and the Medicaid Fraud Control Units for Illinois and New York for their investigative efforts and assistance with the case.

The case is being handled by the Office’s Civil Frauds Unit. Assistant U.S. Attorney Christopher B. Harwood is in charge of the case.

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Attorney General James Announces Settlement With Walgreens Boots Alliance Over Medicaid Fraud Allegations For Over-Dispensing Insulin Pens

Walgreens to Pay $209.2 Million to Resolve Allegations it Falsely Billed New York’s Medicaid Program for Insulin Pens

New York State to Receive Over $6.5 Million Share of Insulin Pens Settlement

NEW YORK – Attorney General Letitia James today announced that New York, together with the federal government and other states, has reached a nationwide $209.2 million settlement with Walgreens Boots Alliance (Walgreens) concerning allegations of fraudulent over-dispensing of insulin pens at Walgreens pharmacies. The qui tam action, unsealed today, resolves allegations that Walgreens knowingly engaged in fraudulent conduct when it dispensed insulin pens. When filling insulin prescriptions, Walgreens did not always adhere to the dosage outlined by the prescribing doctor, but rather dispensed insulin pens in boxes containing five pens, regardless of the patient’s needs. This resulted in a pattern where Medicare and Medicaid beneficiaries were routinely receiving more insulin than prescribed and Walgreens was then billing Medicaid for the additional doses. Walgreens, headquartered in Deerfield, Illinois, operates the largest retail pharmacy chain in the U.S., with 8,309 locations across all 50 states. 

“Cheating our state’s Medicaid program will never be tolerated by this office,” said Attorney General Letitia James. “We will continue to root out illegal practices that increase costs of health care and medication for all New York Medicaid recipients, and will hold accountable any provider that engages in these deceptive practices.”

Under the settlement, Walgreens will pay the United States and the States $209.2 million dollars. Of this amount, $89,185,625.10 will go to the state Medicaid programs to resolve civil allegations that Walgreens’ unlawful over-dispensing of insulin pens caused false claims to be submitted to Medicaid health care programs. The State of New York will receive $6,548,679.82 of this amount in restitution and other recovery.

Walgreens admitted, among other facts, that from January 1, 2006 to December 31, 2017:

In recent years, New York’s Medicaid program paid an average of approximately $425 per box of five insulin pens to pharmacies on behalf of Medicaid beneficiaries.

The investigation was initiated after a whistleblower filed a lawsuit in 2015 in the United States District Court for the Southern District of New York under the qui tam provisions  of the federal False Claims Act and the named plaintiff states’ respective false claims statutes.  The relator in this case will receive a share of the settlement proceeds after full payment by Walgreens.  The case is captionedUnited States of America et al., ex rel. Adam Rahimi et al. v. Walgreen Boots Alliance, Inc., Civil Action No. 15-CV-5686 (S.D.N.Y.) (Crotty, J.).

The insulin pens investigation and settlement were the result of a coordinated effort between the U.S. Attorney’s Office for the Southern District of New York, and the National Association of Medicaid Fraud Control Units (NAMFCU).  A NAMFCU Team conducted the investigation of Walgreens and participated in the settlement negotiations on behalf of the states, and included representatives from the Offices of the Attorneys General for the states of Indiana, New York, Washington, Texas, Oklahoma and Massachusetts.

New York State’s case was handled by Special Assistant Attorney General Alee N. Scott with audit analysis conducted by Principal Auditor-Investigator Meghan Collins, both of whom were members of the NAMFCU Team, and are under the supervision of MFCU Civil Enforcement Division Chief Carolyn T. Ellis.

The New York State Medicaid Fraud Control Unit is led by Director Amy Held and Assistant Deputy Attorney General Paul J. Mahoney. The New York Attorney General’s Division of Criminal Justice is led by Chief Deputy Attorney General José Maldonado.

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Walgreen Co. Agrees to Pay $3.5 Million to Settle Allegations Under the False Claims Act

United States Attorney Matthew D. Krueger announced today that Walgreen Co. (“Walgreens”) has agreed to pay $3.5 million to the United States and the State of Wisconsin to settle allegations that Walgreens violated the False Claims Act by submitting claims to Medicaid for stimulant medications without complying with Medicaid rules designed to ensure that stimulants are dispensed for appropriate medical treatment. 

Walgreens operates retail pharmacies throughout Wisconsin.  The Wisconsin Medicaid program will reimburse a pharmacy for dispensing certain stimulant medications only if the pharmacy first verifies with the prescribing physician that the physician prescribed the stimulant for medically appropriate treatment, such as treatment for attention deficient disorder.  The False Claims Act prohibits a pharmacy from knowingly submitting claims for payment for medications in violation of Medicaid’s rules. 

The United States and the State of Wisconsin allege that, from 2011 through 2014, Walgreens violated Wisconsin Medicaid rules by dispensing routinely stimulant medications to Wisconsin Medicaid beneficiaries without first verifying that the prescribing physician ordered the medication for medically appropriate treatment.  The United States and the State of Wisconsin further allege that, by failing to verify that medications were prescribed for appropriate treatment, Walgreens dispensed and billed Wisconsin Medicaid for medically unnecessary medications. 

“Pharmacies play an important gate-keeping role in the Medicaid program to ensure that the millions of dollars spent each year on prescription medications buy drugs that are medically necessary,” stated United States Attorney Krueger.  “This settlement demonstrates that the Department of Justice will hold pharmacies accountable.”

“The dispensing of medications of any kind needs to be done following all protocols and with proper verification to ensure the medical necessity of the treatment,” said Lamont Pugh III, Special Agent in Charge, U.S. Department of Health and Human Services, Office of Inspector General – Chicago Region. “This settlement includes an OIG Corporate Integrity Agreement that contains requirements, such as multi-site claims reviews to be conducted by an Independent Review Organization, that seek to aid adherence to Federal health care program rules. The OIG will continue to work with our federal, state and local partners to protect the health and safety of Medicaid patients and vital taxpayer dollars.”

“The Federal Bureau of Investigation prioritizes the protection of consumers and will continue to hold accountable healthcare providers who misuse the Medicaid program,” said FBI Special Agent-in-Charge Justin Tolomeo.  “This $3.5 million settlement shows that violations of Medicaid rules have a significant impact on the healthcare industry and taxpayer funds.” 

Although the U.S. Attorney’s Office generally is not issuing press releases during the current lapse in appropriations, this announcement is being made because the settlement falls under the same Corporate Integrity Agreement that was recently announced in relation to cases being settled in the Southern District of New York.  See https://www.justice.gov/usao-sdny/pr/manhattan-us-attorney-announces-2692-million-recovery-walgreens-two-civil-healthcare.   The investigation resulted from whistleblower lawsuits filed under the qui tam provisions of the False Claims Act.  Consequently, the whistleblowers will recover a share of the settlement amount.  As part of the settlement, the United States, the State of Wisconsin, and the whistleblowers asked the district court to dismiss the qui tam complaint. 

Assistant United States Attorney Michael Carter represented the government in this matter.  The FBI, OIG, and the Wisconsin Department of Justice Medicaid Fraud Control & Elder Abuse Unit assisted in the investigation.  The settlement agreement states allegations only; Walgreens does not admit liability for the allegations.