A Bitter Pill for Walgreen to Swallow

Sometimes, it seems, it really is important to deliver just what the doctor ordered.

The giant drug store chain Walgreen was reminded of this today when it agreed to pay a whopping $35 million to settle claims that it switched patients to more expensive versions of prescription drugs to claim bigger Medicaid payouts.

Although it agreed to pay the fine -- which amounts to about 5 percent of its profit in its most recent quarter -- Walgreen denied wrongdoing. The Deerfield, Illinois, company said it "believes the reimbursements it received from Medicaid were consistent with applicable regulations."

Walgreen, which operates more than 5,000 retail pharmacies across the country, said that between 2001 and 2004, it "dispensed one form of each of the generic drugs at issue instead of another form of the same drug."

The problem, at least as far as the federal government is concerned, is that Walgreen always chose the more-expensive version of each drug.

Patients prescribed tablets of the antacid ranitidine, for example, were given capsules, which cost more. At the same time, patients with prescriptions for capsules of the antidepressant fluoxetine were given pricier tablets instead. In all cases, Medicaid was billed for the more-expensive version.

The federal government will receive about $18.6 million in the settlement, and the pharmacist who brought the suit, Bernard Listiza, will receive $4 million. Another $16.4 million will be paid out to 46 states and Puerto Rico under separate settlement agreements.

"Switching medication from tablets to capsules might seem harmless," Patrick Fiztgerald, U.S. Attorney for the Northern District of Illinois said, but it's illegal. He added that the government may not be the only party to pay: any pharmacy caught switching is subject to triple damages, civil penalties, and attorney fees.

by Elizabeth Olson