The Case - Summary

By paying $35 million, Walgreens, the self-proclaimed "Pharmacy America Trusts®" settled allegations by a pharmacist whistleblower that it unlawfully defrauded Medicaid by switching prescriptions for ranitidine, the generic form of the brand-name drug Zantac®, and fluoxetine, the generic form of Prozac®. The United States, Puerto Rico, 42 states, and qui tam Relator Bernard Lisitza claimed that Walgreens improperly caused its pharmacies to switch Medicaid patients' prescriptions from ranitidine tablets to ranitidine capsules, and from fluoxetine capsules to fluoxetine tablets.

The alleged Medicaid fraud covered by the settlement lasted for more than four years, from July 16, 2001 through at least December 31, 2005. The Complaint was brought by the Relator in 2003, under "qui tam" provisions of federal and state False Claims Acts, after he uncovered the conduct and reported the problem to the government. The investigation and prosecution was led by the Attorneys General offices in Florida, Illinois, Ohio, Texas and several other states, and by the United States Attorney's Office in Chicago. Relator Lisitza pursued the case with the assistance of his attorneys, Michael I. Behn and Linda Wyetzner, of Behn & Wyetzner, Chartered, in Chicago.

According to the government, Walgreens switched drugs because the United States and various individual states had imposed price limits for the amounts that Medicaid would pay for the tablet form of ranitidine, and for the capsule form of fluoxetine. By substituting a drug dosage form with a Medicaid price ceiling for another form with no ceiling, Walgreens received substantially higher reimbursement amounts from various state Medicaid programs. For example, the Complaint states that the switches resulted in the government paying Walgreens as much as four times more for ranitidine capsules than for tablets.

Ranitidine tablets were the standard form of the medication. Capsules were rarely prescribed. Likewise, fluoxetine capsules were the standard forms of the drug. Legally, tablets and capsules are different drugs, and state pharmacy laws generally prohibit substituting tablets for capsules or capsules for tablets.

As different drugs, tablets and capsules also have different prices. State Medicaid regulations determine how much a pharmacy is paid for a particular prescription. States follow federal Medicaid reimbursement limits when they are set by the federal government for certain popular generic drugs. The United States, through the Centers for Medicare & Medicaid Services ("CMS") sets a Federal Upper Limit price for ranitidine tablets and fluoxetine capsules. State Medicaid programs followed these federal price limits. There were no price limits for ranitidine capsules or fluoxetine tablets, as they were virtually never prescribed.

The case alleges that Walgreens' ranitidine drug switching violated federal and state False Claims Acts. False Claims Acts prohibit submitting false or fraudulent claims to the government. Here, the United States, individual states and Relator Lisitza alleged that Walgreens violated federal and state False Claims Acts by claiming Medicaid reimbursements for the form of the drug with the higher price when the lower-priced ranitidine tablets should have been provided.

False Claims Acts are designed to deter fraud against the government and provide substantial remedies against those who lie, cheat and steal from the public treasury. The government can collect up to three times the amount it was defrauded in addition to civil penalties of $5,500 to $11,000 per false claim.

Major recoveries have been achieved through incentives and protections in the laws designed to encourage whistleblowers to come forward with information about fraud against the government. Whistleblowers can receive a substantial percentage of the recovery, ranging from 15 to 25 percent when the government pursues the case with the whistleblower. Pharmacists like the Relator in this case have brought numerous successful actions, resulting in taxpayers recovering hundreds of millions of dollars in improper government payments.