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

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.

Write to Heather Won Tesoriero at heather.tesoriero@wsj.com

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