Walgreens Settles with Feds Over Kickback Scheme

Walgreens and the federal government announced a $50 million settlement in a civil fraud lawsuit over allegations the company broke rules against kickbacks when it systematically and illegally signed up hundreds of thousands of people in its Prescription Savings Club discount program who were already on government benefits. The settlement was announced Thursday by Preet Bharara, the United States Attorney for the Southern District of New York.

The complaint said Walgreens knew this was illegal and had a stated company policy against enrolling government beneficiaries in its discount program. Still, for years the Deerfield-based retailer paid bonuses to employees for illegally signing up such customers. Between May 2008 through August 2010 Walgreens paid incentives from $1 to $5 to its employees for each new customer signed up into its discount program without checking if those customers were on benefits, according to the complaint.

"The sheer scope of this nationwide kickback scheme is shocking," said Scott Lampert, Special Agent in Charge at the Health and Human Services Office of Inspector General. "Today's settlement is a message to other retailers that there will be consequences for such conduct."

Walgreens issued a statement saying it will continue its Prescription Savings Club program. It says it entered into the settlement agreement "to avoid [the] uncertainty of litigation, and did so without any admission of legal liability."

The lawsuit began in 2012 when a former pharmacy manager and whistleblower in Florida sued the company over the kickback scheme. The government later joined the case. For initially bringing the suit, he'll receive $9.7 million of the settlement, of which another $3.79 million will go to states to settle fraud claims, according to Thursday's settlement. The remainder will go to the federal government.