Walgreens Forced to Defend Generic Drug Pricing Challenge

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

A proposed class action claiming Walgreen Co. overcharges insured customers for generic drugs is moving forward after a federal judge refused to dismiss most of the 29-count lawsuit.

The lawsuit accuses Walgreens of operating an undisclosed dual pricing scheme in which people who pay for generic drugs in cash are charged a lower price than the price reported to health insurers, Medicare, and Medicaid. A federal judge March 9 allowed the insured customers to move forward with claims of fraud and violations of more than a dozen states’ consumer protection laws.

Walgreens is the country’s largest retail pharmacy, with more than 8,000 locations in all 50 states. The lawsuit seeks to represent a proposed class of “at least hundreds of thousands, and likely millions,” of Walgreens customers, along with insurers and health plans that pay for prescription drugs.

Walgreens isn’t the only major player in the health-care industry to be accused of overcharging patients who purchase generic drugs with health insurance. UnitedHealth, Cigna, and Humana have been accused of working with pharmacy benefit managers to overcharge insured patients compared to uninsured patients through an undisclosed “clawback” scheme. UnitedHealth in 2017 became the first insurer to defeat one of these cases, which are brought under federal employee benefits and racketeering laws.

Case Moves Forward

Walgreens argued in this case that the customers couldn’t state a viable fraud claim against it because they failed to show that the pharmacy made a false statement of material fact. The judge disagreed, accepting at this stage the idea that the prices charged to uninsured customers qualified as the “usual and customary” prices that should have been reported to insurers, and that Walgreens made false factual statements every time it reported higher prices to insurers.

The judge also refused to dismiss most of the state consumer law claims against Walgreens. However, he dismissed the customers’ claim of negligent misrepresentation, explaining that Walgreens wasn’t in the business of “supplying information for the guidance of others,” and thus the claim didn’t apply.

Judge John Z. Lee of the U.S. District Court for the Northern District of Illinois wrote the decision.

The patients are represented by Whitfield Bryson & Mason LLP, Scott+Scott LLP, Halunen Law, Lemmon Law Firm LLC, Tusa PC, and Michael A. Johnson & Associates. Walgreens is represented by Norton Rose Fulbright LLP and A&G Law LLC.

The case is Forth v. Walgreen Co., N.D. Ill., No. 1:17-cv-02246, order partly denying motion to dismiss 3/9/18.

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