Whistleblower Case Against Walgreens Results in $9.9 Million Settlement

False Claims Act lawsuit revealed that Walgreens ignored California’s diagnosis restrictions and billed the California Medicaid program for diagnosis-restricted drugs without verifying that the drugs were prescribed for permitted uses.

DALLAS – Retail pharmacy chain Walgreens has agreed with the California Department of Justice, the United States Department of Justice, and Whistleblower Loyd F. Schmuckley, Jr. to settle civil allegations of false claims fraud for $9.9 million. Whistleblower “Skip” Schmuckley, who is represented by attorneys Paul Lawrence and Charles Siegel of Waters & Kraus LLP, of Dallas, brought the qui tam lawsuit in 2011. Mr. Schmuckley alleged that Walgreens ignored its obligations under the California Medicaid program to dispense certain restricted drugs to Medi-Cal beneficiaries only if required diagnoses could be verified by reference to the written prescriptions themselves or through contact with prescribing physicians.

Mr. Schmuckley, a pharmacist with 28 years’ experience when he was hired by Walgreens in 2008, worked for the pharmacy chain for two and a half years. He alleges that time constraints, quotas, and other pressures placed upon pharmacists to meet Walgreens’ corporate goals made it impossible for them to properly serve the safety and health needs of patients or the fiscal interests of California’s Medi-Cal program in accordance with legally-mandated professional standards. Among other things, Walgreens’ corporate policies requiring that prescriptions be dispensed within 10 minutes or less after a script was scanned into the Walgreens computer system made it impossible for pharmacists to verify the diagnosis for beneficiaries receiving certain high-cost drugs that California is willing to reimburse only if the drugs are used to treat specified diseases or conditions.

In the settlement agreement between Walgreens, the government, and the whistleblower, Walgreens has agreed to pay the State of California the sum of $5,344,339 and the United States the sum of $4,518,661 based upon their respective costs of funding the California Medi-Cal program. Whistleblower attorney Paul Lawrence stated that the whistleblower and his counsel wish to acknowledge particularly California’s Deputy Attorney General Bernice Yew who doggedly pursued the case for more than five years. They also wish to especially thank Assistant United States Attorney Catherine Swann, who pursued a federal investigation of the case in the Eastern District of California. Mr. Lawrence stated that credit is also due to Whistleblower Debbie Reinhart, a pharmacy technician who filed a substantially similar case in the Eastern District of California that was barred by the first-to-file rule of the federal and state False Claims Acts. Although Ms. Reinhart’s second-filed action was barred, it succeeded in prompting the federal investigation in the Eastern District of California.

Mr. Schmuckley’s whistleblower case was originally filed under seal in the Northern District of California on September 23, 2011 and was transferred to the Eastern District of California on March 30, 2017 to effectuate the settlement. Whistleblower “Skip” Schmuckley will be rewarded with 26% of the federal settlement and 21.5% of the California settlement. Mr. Schmuckley also settled retaliation claims against Walgreens for an undisclosed sum. The specific terms and conditions of that agreement are confidential. Mr. Schmuckley will share a small portion of his whistleblower reward with Ms. Reinhart pursuant to an agreement between them.

Mr. Schmuckley lost his job with Walgreens after complaining about its fraudulent billing practices and suffered several years of unemployment or underemployment as a result of his firing. Attorney Charles Siegel praised Schmuckley as a brave whistleblower who patiently persisted with his whistleblower action for more than five years and will now receive a much-deserved financial reward.

The case is United States of America et al. ex rel. Schmuckley v. Walgreens Co..; Case No 2:17-cv-0673 KJM CKD, U.S. District Court for the Eastern District of California, Sacramento Division, but was originally filed under Case No. CV 11-4742 MEJ in the United States District Court for the Northern District of California, San Francisco Division. The Reinhart case is Unites States of America & the State of California ex rel. Debbie G. Reinhart v. Walgreen Co., No. 2:14:0148-WBS-DAD, U.S. District Court for the Eastern District of California.


About Waters & Kraus

Waters & Kraus, LLP is a national plaintiffs’ firm with lawyers practicing qui tam whistleblower litigation and False Claims Act litigation nationwide from primary offices in Dallas, Texas, and Los Angeles, California, with satellite offices on the east coast and elsewhere. Our attorneys represent whistleblowers exposing fraud against the government in a variety of healthcare matters, including off-label or false marketing of medical devices and drugs, retail pharmacy DUR and diagnosis restriction fraud, hospital domestic-care fraud, hospital wage index fraud, skilled nursing facility resource utilization group (RUG) and productivity quota fraud, long-term care hospital (LTCH) fraud, intensive rehab facility (IRF) fraud, hospice facility fraud, mobile imaging facility fraud, and medical provider kickback fraud. Contact us at 800.226.9880 to learn more about our practice and our qui tam attorneys.

Waters Kraus Paul & Siegel is the West Coast practice of Waters & Kraus, LLP, a national plaintiffs’ law firm.

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