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Sacramento, Calif. – United States Attorney Phillip A. Talbert announcedย that Walgreen Co. (Walgreens) has paid $9.86 million to resolve allegations that it violated the federal False Claims Act when it knowingly submitted claims for reimbursement to California’s Medi-Cal program that were not supported by applicable diagnosis and documentation requirements.

Walgreens is one of the largest drugstore chains in the United States, operating approximately 630 stores in California. The company is headquartered in Deerfield, Illinois. The Medi-Cal program is administered by the California Department of Health Care Services (DHCS) and relies on both federal and state funding to provide health care to millions of Californians, including those with low incomes and disabilities.

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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 serve the critical gatekeeping function of confirming and certifying 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. Today’s settlement resolves 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.

The allegations resolved by this settlement were first raised in two lawsuits filed against Walgreens under the qui tam, or whistleblower, provisions of the False Claims Act by a former Walgreens pharmacist and a former pharmacy technician. The Act allows private citizens with knowledge of fraud to bring civil actions on behalf of the government and to share in any recovery. The whistleblowers in this matter will collectively receive approximately $2.3 million of the recovery proceeds.

“This settlement illustrates our commitment to protect the integrity of California’s Medi-Cal program,” said U.S. Attorney Talbert. “Regulations like those at issue here protect both critical funding and beneficiaries served. My office will continue working to ensure that pharmacies comply with these regulations.”

This settlement is the result of a joint effort by the United States Attorney’s Office for the Eastern District of California and California’s Bureau of Medicaid Fraud and Elder Abuse. Assistant United States Attorney Catherine J. Swann handled the matter for the United States with assistance from the Department of Health and Human Services, Office of Inspector General, and the Federal Bureau of Investigation.

The claims settled by this agreement are allegations only, and there has been no determination of liability.

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