Walgreen Co. will pay the U.S. $50 million to settle allegations that it provided kickbacks to government health care beneficiaries who enrolled in its Prescription Savings Club (PSC), which offered monetary awards and discounts, to induce them to patronize Walgreens, the U.S. Department of Justice (DOJ) said.
Federal prosecutors alleged that Walgreens violated the federal Anti-Kickback Statute and the False Claims Act by enrolling hundreds of thousands of Medicare, Medicaid, and Tricare beneficiaries in its PSC program, despite a store program that maintained government health care recipients were ineligible.
According to federal prosecutors, Walgreens failed to do anything meaningful to stop the unlawful kickbacks. The company launched its PSC program in January 2007, offering participants discounts on brand-name drugs and generics in addition to a 10 percent rebate on Walgreens brand products, such as household items, groceries, and over-the-counter drugs.
Later in the year, Walgreens identified about 13,000 members of the PSC program who were Medicare and Medicaid beneficiaries and unenrolled them, but the company lacked effective mechanisms to block unqualified enrollments and monitor the program. As a result, many others remained enrolled at the same time and the program continued to accept additional unqualified beneficiaries through 2015.
Additionally, the U.S. alleges Walgreens incentivized its employees to enroll customers in the PSC program regardless of whether they were government beneficiaries. Walgreens paid its employees $1-$5 per enrollment. Meanwhile, the company continued to market the PSC program to government health care beneficiaries.
U.S. Attorney Preet Bharara, Manhattan, announced the settlement on Thursday. On the same day, Massachusetts Attorney General Maura Healey announced that Walgreens would pay $200,000 into the state’s Youth Opioid Prevention program as part a settlement resolving allegations that some Walgreens pharmacies improperly dispensed controlled substances.
Under the settlement, Walgreens is required to pay approximately $46.21 million to the U.S. and approximately $3.79 million to resolve several state civil fraud claims.
The lawsuit was filed in 2012 by former Florida Walgreens pharmacy manager Marc Baker. Mr. Baker brought the complaint under the whistleblower provisions of the False Claims Act, which entitles him to a percent of any recovery made. Mr. Baker will receive $9.7 million of the settlement – more than 19 percent of the total recovery – as his award.