Tuesday, May 23, 2017

Walgreen Paid $9.86 Million to Settle False Claim Allegations of Improper Medi-Cal Billings for Code 1 Drugs

It's not just small pharmacies that get false claims (qui tam) cases. The chains are ripe targets for cases but they have the resources to defend, pay settlements and stay in business. A recent case shows that even large pharmacies will settle rather than go to trial in these cases.

On April 20, 2017, Walgreens paid $9.86 million to resolve civil lawsuit allegations that it violated the federal False Claims Act when it knowingly submitted claims for reimbursement to California’s Medi-Cal program for Code 1 Drugs that were not supported by applicable diagnosis and documentation requirements. There were no admissions. 

This settlement surrounded the nuances of pharmacy billing for Medi-Cal. Medi-Cal utilizes a formulary list, commonly known as “Code 1” drugs, which designates certain restrictions for each listed drug, including restrictions pertaining to diagnoses. Medi-Cal will reimburse certain Code 1 drugs only for approved diagnoses, taking into account criteria such as the drug’s safety, efficacy, misuse potential, and cost. Pharmacies confirm and certify that these Code 1 drugs are dispensed for the approved diagnoses. Walgreens may bill for drugs prescribed outside of the approved diagnoses, but it must submit a request to DHCS that includes a justification for the non‑approved use (often called a TAR).

Walgreens is one of the largest drugstore chains in the United States and operates over 600 stores in California. The two false claims case were filed by a former Walgreens pharmacist and a former pharmacy technician and alleged Walgreens did not follow Medi-Cal rules for dispensing and billing Code 1 Drugs. The whistleblowers will collectively receive approximately $2.3 million. In the typical qui tam plaintiff case, their lawyers will get 40 percent of the settlement and get their costs reimbursed. 

The settlement resolved allegations that Walgreens failed to confirm and document the requisite diagnoses, and in some instances dispensed drugs for non-approved diagnoses, then knowingly billed Medi-Cal for these prescriptions. Now if this type of case is brought against a stand alone pharmacy or small chain, it can put it out of business. This is one reason why compliance when one's business is small is more important than ever.

Posted by Tracy Green, Esq.
Green and Associates
Email: tgreen@greenassoc.com


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