Prescription drug retailer Walgreens has entered into a $269 million settlement with the U.S. Department of Justice to resolve allegations of Medicaid fraud.

The allegations were brought under provisions of the False Claims Act by two former Walgreens employees who claimed the company was overcharging the federal government for certain drugs and medical supplies. The settlement involves two separate whistleblower lawsuits, one of which involved “pens” used by diabetics to inject insulin, and the other alleging false reporting on drug prices.

Biggest Medicaid Fraud Settlements Ever?

Both settlements appear to be the largest penalties ever assessed against a “traditional brick-and-mortar” pharmacy chain.

The first case involved allegations of falsifying records in order to get payments from state and federal healthcare programs. In this Medicare fraud complaint, the whistleblower reported that Walgreens was understating the number of treatment days for which patients were allowed to get insulin pens.

According to the Department of Justice (DOJ), this enabled the company to bill Medicare and Medicaid for prescriptions that should not have been filled under physician’s recommended schedules. It may also have led to the rise of a “black market” for insulin pens, since patients would wind up with more insulin pens than they needed. Walgreens pledged a total of $209 million to resolve these allegations.

In the other complaint, Walgreens stood accused of disregarding regulations requiring that it bill Medicaid for no more than its “usual and customary” price when filing for reimbursement. The parent corporation has agreed to pay compensation and penalties in the amount of $60 million to resolve the allegations of improper billing.

Corporate Recidivism?

Walgreens
 has faced allegations of healthcare fraud like these before. Only days after entering into the present settlement, according to a press release by the U.S. Attorney’s Office in the Southern District of New York, Walgreens agreed to pay $50 million over charges of paying kickbacks in the form of illegal discounts to Medicare and Medicaid patients, allegedly giving them incentives to have prescriptions filled at Walgreens pharmacies.

According to the release, approximately $42.2 million will go to the federal government, while the remainder will go toward resolving state claims. Special Agent Scott Lampert described the extend of the Medicaid fraud as “shocking,” and said that Walgreen has admitted to paying employee bonuses to customers without bothering to find out whether or not they were enrolled in a qualifying government health care program.

About the FCA

The False Claims Act originated during the U.S. Civil War in 1863 as a way of stopping the rampant corruption and fraud that was going on among companies and individuals having contracts with the Union Army at the time. Over the past few decades, it has been applied to other areas, including Medicaid fraud.

Under this law, a person with knowledge of fraud and evidence to prove it is entitled to protection from retaliation as well as a percentage of any recovery when they file a “whistleblower” lawsuit on behalf of the government.