Class action accuses Walgreens of 'scheme' with insurers to overcharge customers, claw back copays

By Scott Holland | Aug 13, 2017

A customer who said Walgreens charged him $21.80 for a generic drug through his insurance plan without telling him he could have paid only $10 if he paid in cash, has filed a federal class action complaint against the Deerfield-based retail pharmacy giant, saying the overcharge is part of a “fraudulent scheme” between the retailer and insurance companies.

In his complaint filed on Aug. 9 in Chicago, David Grabstald, of San Francisco, said he made his purchase May 30 and no one at the store told him he could save 54 percent by not running the purchase through his insurer, Anthem Blue Cross. He said his experience is emblematic of a “fraudulent scheme” in which Walgreens participates with pharmacy benefit managers.

According to Grabstald, the benefit managers negotiate prices insurance companies pay the pharmacies. That arrangement causes the insured to bring their medication prescriptions to those pharmacies.

“As a result,” the complaint alleged, “Walgreens is eager to reach agreements with PBMs that will drive more people to the stores, where customers often purchase more than their generic drugs.”

Grabstald further said such agreements “are based on secret, undisclosed contracts, under which Walgreens agrees to specific amounts it will charge and collect from insured customers — but the customers can neither see nor learn about these agreements or their terms from the pharmacies, the insurance companies, or anyone else. The linchpin of the scheme is that the consumer pays the amount negotiated between the PBM and Walgreens even if that amount exceeds the price of the drug without insurance.”

He also said co-pays collected from customers exceed both Walgreens’ price and profits, then sends the excess back to the benefit managers, a practice known as “clawback” or spread payments. Grabstald cited benefits manager OptumRx, which calls the practice its Pharmacy Reimbursement Overpayment program.

According to the complaint, the National Community Pharmacists Association conducted a survey of hundreds of member pharmacies and found clawbacks to be a common practice. Grabstald also cited a New Orleans television station’s series on the practice, “with pharmacists interviewed in the dark with voice distorters as they detailed the scheme.”

Yet he singled out Walgreens as “motivated by profit” and saying it “deliberately entered into these contracts, dedicating itself to the secret scheme that kept customers in the dark about the true price of the affected drugs” — this despite promoting itself as committed to being candid and honest with customers. He also cited a 2016 SEC filing in which Walgreens said being expelled from a benefit manager network could substantially harm its business.

According to the complaint, Walgreens’ posts about $84 billion in annual prescription drug sales.

Grabstald said Walgreens cannot rely on any statutes of limitations because it failed to disclose the scheme to customers. He requested certification of a Racketeer Influenced and Corrupt Organizations (RICO) Act class, for anyone insured under a health benefit plan administered by a pharmacy benefit manager, and a subclass for those on plans subject to the Employee Retirement Income Security Act, as well as a California subclass.

In addition to a jury trial, Grabstald seeks more than $5 million in damages and wants the court to block Walgreens from engaging in clawback schemes with benefit managers.

Representing Grabstald, and putative class attorneys, are lawyers from Hagens Berman Sobol Shapiro LLP in Seattle and Chicago; and Stanley Law Group, of Dallas.

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Organizations in this Story

Hagens Berman Sobol Shapiro, LLP Stanley Law Group U.S. District Court for the Northern District of Illinois Walgreens Inc.

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