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Walgreens Resolves Federal and State Investigations Related to Medicaid Reimbursements for Three Drugs

Posted on: Wednesday, 4 June 2008, 12:01 CDT

Walgreens (NYSE: WAG)(NASDAQ: WAG) today said it has resolved federal and state investigations related to disputes over Medicaid reimbursements for three drugs the company dispensed at its pharmacies. The company denied any wrongdoing in connection with the settlement.

Many generic drugs, including those at issue in the settlement agreement, are made as both tablets and capsules. Between 2001 and 2004, Walgreens dispensed one form of each of the generic drugs at issue instead of another form of the same drug. Federal and state regulators investigated to determine whether this practice resulted in higher Medicaid reimbursement to the company. Walgreens believes the reimbursements it received from Medicaid were consistent with applicable regulations.

Walgreens elected to reach a settlement to avoid the expense and uncertainty of litigation and to resolve all of the governments' claims.

The company has agreed to pay the federal government, 42 states and Puerto Rico a total of $35 million, plus investigative costs of approximately $280,000. Walgreens has reserved for the settlement, which will have no impact on financial results.

The company also agreed to a five-year Corporate Integrity Agreement with the Office of Inspector General of the U.S. Department of Health and Human Services. Under the agreement, the company will maintain its existing compliance measures and implement new policies and procedures regarding medication interchange. These additional compliance measures will be incorporated into annual training for many employees.

Walgreens (www.walgreens.com) is the nation's largest drugstore chain with fiscal 2007 sales of $53.8 billion. The company operates 6,252 drugstores in 49 states, the District of Columbia and Puerto Rico. Walgreens provides the most convenient access to consumer goods and cost-effective health care services in America through its retail drugstores, Walgreens Health Services division and Walgreens Health and Wellness division. Walgreens Health Services assists pharmacy patients and prescription drug and medical plans through Walgreens Health Initiatives Inc. (a pharmacy benefit manager), Walgreens Mail Service Inc., Walgreens Home Care Inc., Walgreens Specialty Pharmacy LLC and SeniorMed LLC (a pharmacy provider to long-term care facilities). Walgreens Health and Wellness division includes Take Care Health Systems, which is comprised of: Take Care Consumer Solutions, managers of 172 convenient care clinics at Walgreens drugstores, and Take Care Employer Solutions, managers of worksite-based health and wellness services at more than 370 employer campuses. Through these growing services and its drugstores, Walgreens plans to keep people healthier and more productive through 10,000 points of care by 2012.

This news release may contain forward-looking statements that involve risks and uncertainties. The following factors could cause results to differ materially from management expectations as projected in such forward-looking statements: seasonal variations, competition, risks of new business areas, the availability and cost of real estate and construction, and changes in federal or state legislation or regulations. Investors are referred to the "Cautionary Note Regarding Forward-Looking Statements" in the Company's most recent Form 10-K, which Note is incorporated into this news release by reference.

Source: Business Wire

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