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US: Walgreen to Pay $35 Million
To Settle Drug-Switch Charges

June 4th, 2008

Walgreen Co. has agreed to pay $35 million to settle allegations that it improperly switched customers to more expensive forms of pills paid for by Medicaid, the government health care program for the poor. A lawsuit alleging fraud by the chain-drugstore company was brought by an Illinois pharmacist and joined by the federal government and 42 states that paid for the medication.

The complaint, filed in 2003 in U.S. District Court for Northern Illinois, alleges Walgreen switched Medicaid patients taking the generic form of heartburn medicine Zantac to more costly capsules from tablets. It also alleges that the company switched patients taking a generic version of anti-depressant Prozac to higher-priced tablets from capsules. Medicaid sets maximum reimbursement prices for drugs, which can vary depending on the form of the drug. It is illegal to move patients to more costly dosage forms.

The case was brought by Bernard Lisitza, who worked as a pharmacist processing Walgreen prescriptions. The pill-switching allegedly took place from July 2001 to December 2005. Today's settlement, announced today by the U.S. Attorney for the Northern District of Illinois, is the result of the third pill-switching suit brought by Mr. Lisitza under the False Claims Act, which allows people to file claims alleging fraud against the government and lets them recover a share of any payments.

A case he brought against Omnicare Inc. settled in 2006 for $50 million. Mr. Lisitza received a $6.4 million share of the Omnicare settlement, according to a U.S. Justice Department news release. In March, CVS Caremark Corp. settled a claim brought by Mr. Lisitza for $36.7 million. According to his attorney, Michael Behn, his client received $4.3 million for that suit and will receive $5 million for today's settlement with Walgreen.

Walgreen, which operates 6,252 drugstores, denied any wrongdoing in a statement. The pharmacy chain, based in Deerfield, Ill., said it "believes the reimbursements it received from Medicaid were consistent with applicable regulations." The company said it reached a settlement "to avoid the expense and uncertainty of litigation and to resolve all of the governments' claims." Walgreen posted sales of $53.8 billion for its most recent fiscal year. It said the settlement will have no impact on its financial results.

Under a five-year agreement with the U.S. government, Walgreen also will increase its compliance training for many employees.

--Amy Merrick contributed to this article.

Write to Heather Won Tesoriero at

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