A federal judge has renewed a 10-year-old Medicare and Medicaid fraud lawsuit against Walgreens, which accuses the pharmacy giant of an alleged kickback scheme centered on waiving copays for patients at a West Side health clinic, allegedly to allow those prescriptions to be auto-refilled at higher prices at a small specialty pharmacy.
The judge, however, will not allow the state of Illinois to move forward with its own separate, related claim against Walgreens over the same alleged conduct.
The ruling was filed March 29 in Chicago federal court by U.S. District Judge John F. Kness.
U.S. District Judge John Kness
| Kness
The case carries a long and winding history through the courts.
The lawsuit was originally filed in 2014 by named plaintiffs Sarah Castillo Baier and Rita Svendsen Baier. It was brought as so-called qui tam action, or a lawsuit brought by individuals to remedy fraud allegedly commited against a government.
In this instance, the plaintiffs serve as so-called relators, bringing their case on behalf of the federal government. If successful, relators can claim a share of any judgment or settlement paid to the federal or state governments to remedy the alleged fraud.
According to court documents, the Baiers allegedly worked as pharmacy technicians at the C&M pharmacy in suburban Glenview. The former independent pharmacy was acquired by Walgreens in 2006.
According to the complaint, the Baiers brought the action after they became "alarmed" by instructions by their supervising pharmacists to allegedly ignore directives issued in 2013 by Medicare and Medicaid forbidding pharmacies from continuing practices of automatically refilling prescriptions funded by the government programs.
In this case, they said, the alleged instructions particularly were designed to allow the Walgreens C&M location to continue auto-refilling prescriptions issued to patients by doctors at the Cook County Health & Hospital System's Ruth M. Rothstein CORE Center clinic, located at 2020 W. Harrison St., Chicago.
According to the complaint, Walgreens allegedly intentionally did not integrate C&M's computers into its larger corporate network, allowing it to be the only store that operated under the CarePoint system when processing prescriptions. The lawsuit claims this was done to allow C&M to continue to circumvent the auto-refill ban, which Walgreens had updated the rest of its network, which uses a system known as Intercom Plus, to acknowledge and comply with.
To further facilitate the alleged improper auto-refill scheme, the relators asserted Walgreens, through C&M, would routinely waive patient co-pays, when such co-pays should have been owed through Medicare and Medicaid. The lawsuit asserted the waived co-pays were written off as "bad debt."
The lawsuit claimed Walgreens' conduct amounted to an illegal kickback scheme and fraud.
After the Baiers had filed their qui tam action, the U.S. government and the state of Illinois each filed their own complaints, seeking to extract payment from Walgreens directly.
The court at various points has rejected all of the various complaints filed against Walgreens over the alleged fraud and kickback scheme at C&M. Most recently, U.S. District Judge John Robert Blakey dismissed amended complaints from both the relators and the state, finding the complaints still did not deliver enough specific evidence to back their claims that Walgreens had engaged in fraud under the False Claims Act.
The case was reassigned to Judge Kness.
The Baiers and the state amended their complaints once more, with Kness acknowledging both complaints carried more "heft" with more detailed explanations of how the Baiers learned of the alleged scheme, and how Walgreens C&M allegedly carried it out.
However, while the state's complaint still falls short of filling in all of the necessary pieces to complete the puzzle of its False Claims Act claims, Kness said, after 10 years in court, the Baiers' complaint has at last cleared the legal bar that could allow it to proceed.
Specifically, Kness noted the Baiers' new complaint includes evidence showing a specific patient's copayments were routinely waived and written off as "bad debt" at the directions of the pharmacy's management.
The judge noted that Walgreens could yet defeat the allegations later in proceedings.
"... But, at this stage of litigation, Relators have sufficiently pleaded their allegation of Defendant’s violation of the (False Claims Act)," Kness wrote.
The state's complaint, however, still falls short, the judge said.
While the relators' claims rested on the alleged kickbacks and copay waivers, the state's claim focuses on the auto-refills themselves and Walgreens alleged knowledge of the alleged fraud scheme.
But the judge said the state still has yet to provide proof that Walgreens actually knew about C&M's actions. Walgreens alleged decision to allow C&M to operate on the CarePoint system, rather than Walgreens' Intercom Plus system, is not enough, Kness said.
And the judge also brushed aside the state's contentions that Walgreens should have known about the alleged fraud at C&M "because it should have noted the lack of decline in C&M’s prescription fills following the auto-refill prohibition."
Kness said the state still has yet to show how prescription filling activity at the pharmacy should have changed, or how such activity may have changed at other pharmacies following the ban on auto refills in 2013.
A spokesman for Walgreens declined to respond to the decision, telling the Cook County Record that the company would not comment on the case or the ruling.
The relators are represented by attorneys Kenneth A. Wexler and Kara A. Elgersma, of Wexler Wallace LLP, of Chicago; and Sherrie R. Savett and Glen L. Abramson, of Berger Montague PC, of Philadelphia.
Walgreens is represented by attorneys Tinos Diamantatos and Megan R. Braden, of the firm of Morgan Lewis & Bockius, of Chicago.