Huge Settlements With Retail Giant in False Claims Act Case

Last week, a number of US attorneys announced that the federal government has settled two lawsuits against pharmacy retail giant Walgreens based on the federal False Claims Act.

The first settlement, which was approved on Jan. 16, 2019, and unsealed yesterday, requires Walgreens to pay $209.2 million to settle allegations that it improperly billed Medicaid, Medicare, and other federal healthcare programs for hundreds of thousands of insulin pens it knowingly dispensed to program beneficiaries who did not need them.

The second settlement, which was approved the day before, on Jan. 15, 2019 and was unsealed at the same time, requires that Walgreens pay $60 million to the government to settle allegations that it overbilled Medicaid. According to the settlement, the company did not disclose and failed to charge Medicaid the lower drug prices that Walgreens offered the public through a discount program.

As noted, as part of both settlements, Walgreens admitted its liability and accepted responsibility for the conduct that was alleged by the government in its complaints under the False Claims Act.

Insulin Pens Settlement Details

The federal government’s complaint in the insulin open case alleged that Walgreens routinely falsified its federal reimbursement data with regard to insulin pens, by submitting fraudulent days-of-supply data to federal healthcare programs.  The company also sought reimbursement from the federal programs for insulin pens it dispensed to beneficiaries who did not need them.

Walgreens also engaged in two practices that resulted in fraudulent submissions. For one of them, the company configured its electronic pharmacy management system in a way that prevented pharmacists from dispensing less than five insulin pens, which is a full box, even when patients needed fewer than five. Secondly, whenever a full box of insulin pens exceeded the limit on the total number of daily doses, based on the federal healthcare program’s guidelines, Walgreens would claim the total days of supply remained under that limit.

As a result of these practices, Medicare and Medicaid paid the pharmacy retailer millions of dollars for insulin that many beneficiaries neither needed nor used.  In the best case scenario, that means huge quantities of valuable medications were wasted, but in the worst case, there was a potential for overuse and abuse. Either way, taxpayer money was wasted in both actions.

According to the insulin pens settlement, Walgreens will pay the federal government approximately $168 million, and they will separately pay about $41.2 million to state governments.

Discount Drug Pricing Settlement Details

In the complaint in this case, the federal government alleged that Walgreens operated a  Prescription Savings Club (PSC) program. Under this program, customers were supposed to receive discounts when they ordered their prescription medications from Walgreens. According to Medicaid regulations, when the company sought Medicaid reimbursement, they were only at the “usual and customary price,” which, according to most states’ Medicaid regulations, means they must claim reimbursement for lowest drug price point after any discounts offered.

When seeking Medicaid reimbursement, Walgreens routinely failed to disclose the discount drug prices it offered customers through the PSC program. As a result of that oversight, Medicaid programs routinely paid Walgreens more than it was entitled to.

The discount pricing settlement requires Walgreens to pay approximately $32 million to the federal government and an additional $28 million or so to state governments who were harmed.

These settlements also require Walgreens to entered into a Corporate Integrity Agreement with the Office of the Inspector General with the Department of Health and Human Services. The Corporate Integrity Agreement reaches broadly across Walgreens entire operation and will include board oversight, multi-site claims reviews conducted by an Independent Review Organization, among other requirements.

Whistleblowers Will Receive a Huge Payout

The whistleblowers in these two cases will receive a hefty payout, as the False Claims Act provides an award of between 15 percent and 30 percent when they file a lawsuit and the federal government joins the case. Two pharmacists filed the original insulin pen case in July 2015 and could receive an eight-figure payout. Marc Baker, a pharmacy manager in Florida, filed the original complaint in the drug price discounts case and will likely receive millions for his whistleblowing activities.

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