On April 20, 2017, United States Attorney Phillip A. Talbert announced that Walgreen Co. paid $9.86 million to the government to resolve allegations that the company knowingly submitted claims for reimbursement to California’s Medi-Cal program without requisite diagnosis or documentation. The claims at issue were brought under the qui tam provision of the False Claims Act by a former Walgreens pharmacist and pharmacy technician. Under the qui tam provision, a whistleblower may bring claims on behalf of the government for fraud on government programs.  Here, two whistleblowers alleged that Walgreens failed to confirm and document the diagnoses for some of the medication it distributed to Medi-Cal patients and for which Walgreens sought reimbursement. The allegations included instances of Walgreens dispensing drugs to Medi-Cal patients who lacked an approved diagnosis for such medication and then billing Medi-Cal for reimbursement.

Walgreens, one of the largest drugstore chains in the U.S., is headquartered in Deerfield, Illinois and operates about 630 stores in California alone. The company serves Medi-Cal patients in these California stores, providing access to prescription medication for the program’s enrollees that include California’s low income children and adults, pregnant, and disabled citizens. Medi-Cal is a program under Medicaid and funded by the California Department of Health Care Services (DHCS). Medi-Cal is as an affordable option for health care coverage for the most vulnerable populations of the state. These programs cover essential health benefits for enrollees from maternity and pediatric care to mental health, rehabilitation, and prescription drugs. Medi-Cal, however, offers its coverage at a steeper discount: a family will see a maximum monthly premium of only $39. Medi-Cal partners with pharmacies by allowing the company to distribute prescribed medicine to Medi-Cal patients and later bill the cost of those drugs back to the government. Medi-Cal uses a certain list of “Code 1” drugs that designates restrictions for each medication listed. Pharmacies, then, must accurately confirm and certify that these Code 1 drugs are ethically dispensed. While Medi-Cal will reimburse certain Code 1 drugs for their approved diagnoses, pharmacies like Walgreens are required to submit a request to the DHCS for approval of reimbursement for a medication dispensed for reasons other than its intended diagnosis. The qui tam whistleblowers in this case allege that Walgreens knowingly submitted reimbursements to Medi-Cal for drugs that were dispensed for non-DHCS approved diagnoses, thus defrauding the government and the program.

The recent settlement “illustrates our commitment to protect the integrity of California’s Medi-Cal program,” said U.S. Attorney Talbert. “Regulations like those at issue here protect both critical funding and beneficiaries served.” The whistleblowers stand to receive a total $2.3 million of the recovery per the False Claims Act provision.