A Manhattan U.S. Attorney announced that Walgreens Co. (“Walgreens”) has recently agreed to pay approximately $50 million to settle a lawsuit alleging that it used kickbacks to induce beneficiaries of government healthcare programs to fill their prescriptions at Walgreens pharmacies. The lawsuit, which began as an action brought by a qui tam whistleblower, alleged that Walgreens’ actions constituted a violation of the federal Anti-Kickback Statute (“AKS”) and False Claims Act (“FCA”). Walgreens has admitted its conduct as a condition of the settlement.

According to the complaint and settlement agreement filed in federal court, Walgreens, one of the largest pharmacy chains in the country, offered its customers discounts and other inducements to fill prescriptions at Walgreens pharmacies through its Prescriptions Savings Club program beginning in 2007. In October 2007, Walgreens identified thousands of Medicare and Medicaid beneficiaries who had enrolled in the Prescriptions Savings Club and removed them from the program. Internal documents show that Walgreens knew that offering these inducements to beneficiaries of government programs such as Medicare and Medicaid would constitute an illegal kickback under the federal Anti-Kickback Statute. Despite this, Walgreens continued to enroll government beneficiaries in the Prescriptions Savings Club program from November 2007 through December 2015.

Walgreens made no effort to check whether the customers it was enrolling were government beneficiaries, even though Walgreens’ own database contained tens of thousands of notations showing that Prescription Savings Club members were Medicare or Medicaid beneficiaries. The company also often paid its employees bonuses for customers they enrolled in the Club, regardless of whether the customers were beneficiaries of a government program. As a result, according to U.S. Attorneys, Walgreens enrolled hundreds of thousands of beneficiaries of government programs such as Medicare and Medicaid in the Prescriptions Savings Club between 2007 and 2015. A special agent from the Department of Health and Human Services Office of the Inspector General described Walgreens’ conduct as “shocking” and the penalties associated with the settlement as “a message to other retailers that there will be consequences for such conduct.”

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 a total of approximately $50 million for violations of federal and state laws.