Recovery Amount: $35 Million
Qui Tam Action Against Walgreens For Medicaid Fraud
Medicaid is a joint federal-state program to pay health costs for the indigent. It has a long history of paying for prescription drugs. Unfortunately, there is also a long history of Medicaid fraud, particularly involving Medicaid payments for prescription drugs. Drug manufacturers and pharmacies have consistently developed new schemes to cheat the Medicaid system such as paying improper kickbacks, illegally switching drugs, using off-label marketing, and falsely inflating drug prices.
One such scheme involves Walgreens Company, the self-proclaimed “Pharmacy America Trusts®.” Walgreens was founded in 1901, and according to its web site is, “not only the nation’s largest retail pharmacy chain, it is considered the leader in innovative drugstore retailing,” and operates nearly 6,000 retail pharmacy stores.
The False Claims Act Violations
By paying $35 million, Walgreens settled allegations by pharmacist-whistleblower Bernard Lisitza that it unlawfully defrauded Medicaid by switching prescriptions for ranitidine, the generic form of the brand-name drug Zantac®, and fluoxetine, the generic form of Prozac®. The United States, Puerto Rico, 42 states, and the qui tam relator claimed that Walgreens improperly caused its pharmacies to switch Medicaid patients’ prescriptions from ranitidine tablets to ranitidine capsules, and from fluoxetine capsules to fluoxetine tablets.
The alleged Medicaid fraud covered by the settlement lasted for more than four years, from July 16, 2001 through at least December 31, 2005. The complaint was brought in 2003 under the qui tam provisions of federal and state False Claims Acts, after whistleblower relator Bernard Lisitza uncovered the conduct and reported the problem to the government. The investigation and prosecution was led by the Attorneys General Offices in Florida, Illinois, Ohio, Texas and several other states, and by the United States Attorney’s Office in Chicago. Qui tam Relator Lisitza pursued the case with the assistance of his attorneys, Michael I. Behn and Linda Wyetzner, of Behn & Wyetzner, Chartered, in Chicago.
According to the qui tam relator’s allegations, Walgreens switched drugs because the United States and various individual states had imposed price limits for the amounts that Medicaid would pay for the tablet form of ranitidine, and for the capsule form of fluoxetine. By substituting a dosage form that did not have a Medicaid price ceiling, Walgreens received substantially higher reimbursement amounts from various state Medicaid programs. For example, the complaint states that Walgreens received four times more reimbursement for switching prescriptions of ranitidine tablets to ranitidine capsules.
Ranitidine tablets were the standard form of the medication. Capsules were rarely prescribed. Likewise, fluoxetine capsules were the standard forms of the drug. Legally, tablets and capsules are different drugs, and state pharmacy laws generally prohibit substituting tablets for capsules or capsules for tablets.
As different drugs, tablets and capsules also can have different prices. State Medicaid regulations determine how much a pharmacy is paid for a particular prescription. States follow federal Medicaid reimbursement limits when they are set by the federal government for certain popular generic drugs. The United States, through the Centers for Medicare & Medicaid Services (“CMS”), set a Federal Upper Limit price for ranitidine tablets and fluoxetine capsules. State Medicaid programs followed these federal price limits. There were no price limits for ranitidine capsules or fluoxetine tablets, as they were virtually never prescribed.
This qui tam case alleged that Walgreens violated federal and state false claims laws by switching prescriptions for ranitidine and fluoxetine and submitting claims for Medicaid reimbursement for a higher-priced form of a drug when the lower-priced form should have been provided.
A qui tam claim is designed to deter fraud against the government and provide substantial remedies against those who lie, cheat, and steal from the public treasury. The government can collect up to three times the amount it was defrauded in addition to civil penalties of $5,500 to $11,000 per false claim.
Major recoveries have been achieved through incentives and protections in the laws designed to encourage whistleblowers to come forward with information about fraud against the government. Whistleblowers can receive a substantial percentage of the recovery, ranging from 15 to 25 percent when the government pursues the case with the whistleblower. Pharmacists like the Relator in this qui tam case have brought numerous successful actions, resulting in taxpayers recovering hundreds of millions of dollars in improper government payments.