The U.S. Department of Justice (DOJ) announced on April 20, 2012, that Walgreens agreed to pay $7.9 million to settle allegations of violations of the federal Anti-Kickback Statute and the False Claims Act.  This announcement came just one day after the DOJ issued a news release that pharmaceutical giant Merck Sharp & Dohme was sentenced by a federal district court in Boston to pay a criminal fine of nearly $322 million for the off-label marketing of the painkiller Vioxx.

Although Walgreens admitted no liability in the settlement, the United States alleged that Walgreens offered illegal remunerations in the form of gift cards, gift checks and other similar promotions to Medicare and Medicaid beneficiaries in order to induce them to transfer their prescriptions from other pharmacies to Walgreens.  According to Walgreens, its advertisements typically noted that such offers did not apply to beneficiaries of federal health care programs.  However, the government claimed that Walgreens employees frequently ignored the stated exemptions on the face of the coupons and offered gift cards to customers who were beneficiaries of Medicare and Medicaid.  The United States learned of these allegations through two whistleblowers: Cassie Bass, a pharmacy technician formerly employed by Walgreens in Michigan, and Jack Chin, an independent pharmacist in Florida.

The government alleged that Walgreens violated the Anti-Kickback Statute by offering a kickback (e.g., a gift card) to a Medicare or Medicaid patient in exchange for the Medicare or Medicaid beneficiary referring herself to Walgreens for a service paid by the Medicare or Medicaid program.  Additionally, the government alleged that Walgreens violated the False Claims Act by submitting false or fraudulent claims for items and services provided in violation of the Anti-Kickback Statute.

According to the DOJ, this case represented the government’s strong commitment to pursuing improper practices in the retail pharmacy industry that have the effect of manipulating patient decisions.  This settlement highlights the federal government’s relentless mission to combat health care fraud and the importance of compliance with health care laws and regulations.