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TMCNet:  Hagens Berman: Walgreens Sued for Alleged Hidden Generic Drug Overpricing Scheme with PBMs

[August 09, 2017]

Hagens Berman: Walgreens Sued for Alleged Hidden Generic Drug Overpricing Scheme with PBMs

Consumers today sued Walgreens in a class-action lawsuit accusing the pharmacy giant of colluding with third parties to fraudulently drive up the cost of generic prescription drugs, according to Hagens Berman. The law firm also sued CVS for a similar concealed fraud on Aug. 7, 2017.

If you used your insurance plan to fill a prescription for generic drugs at a Walgreens pharmacy, you may be entitled to relief. Find out more about the class-action lawsuit against Walgreens for prescription drug cost increases.

The lawsuit, filed Aug. 9, 2017, in the U.S. District Court for the Northern District of Illinois, details a carefully orchestrated scheme between Walgreens and third-party pharmacy benefit managers (PBMs) to raise the prices of generic drugs, charging consumers what it calls a "co-pay," when in reality a significant portion of this amount is kicked back to PBMs. Walgreens also earns more money from the transaction compared to customers who don't use insurance.

The complaint states that PBMs use their marketing leverage with pharmacies to negotiate lower prices that the insurance companies have to pay to pharmacies. Pharmacies, in turn, get the benefit of having enrollees in the insurance plan coming to their stores to get their prescriptions filled.

"Just as we found with CVS, Walgreens appear to be making deals behind closed doors with PBMs, keeping the public in the dark about a scheme that effectively punishes customers who choose to use their insurance - something they believe will get them the better price," said Steve Berman, managing partner of Hagens Berman. "We think it's time Walgreens' customers learned the truth."

A Two-Pronged Approach

In the first part of the scheme, Walgreens deliberately charges customers who use their insurance more for generic drugs than customers who pay cash or simply don't use their insurance. As cited in the complaint, Randal Johnson, the president of the Louisiana Independent Pharmacies Association, explained, "…it's actually costing you more to acquire the drug with your insurance than you could if you walked in off the street and you didn't have insurance." Walgreens never tells customers that they can save money by not using insurance.

The suit's named plaintiff, David Grabstald, is one of those customers. On May 30, 2017, he used his insurance to purchase a certain generic drug at his local Walgreens, and under his insurance plan he was required to pay $21.80. If he simply paid in cash, without using his insurance, he would have paid only $10, according to the lawsuit. Walgreens never told him that paying in cash would allow him to pay 54 percent less for the drug.

"Walgreens instead chooses to remain silent and take this extra money, knowing well that no reasonable consumer would make such a choice," Berman said.

In the second part of the scheme, Walgreens overcharges customers by collecting "co-pays" that exceed the pharmacists' price and profit, again unbeknown to the customer, according to the complaint. Walgreens gives this extra cash back to PBMs, again part of an undisclosed agreement between the PBMs and Walgreens.

These contracts between Walgreens and the PBMs are sealed from public view under strict confidentiality agreements, barring consumers from ever learning the true source of their drug cost.

The lawsuit states that this hidden fraud violates federal racketeering laws under the Racketeer Influenced and Corrupt Organizations (RICO) Act. The suit also brings claims of fraudulent concealment, fiduciary conflicts of interest, lack of adequate care and violations of state consumer rights laws.

Under ERISA, Walgreens has an obligation as a fiduciary to act "solely in the interest of the participants and beneficiaries," according to the suit, and attorneys believe that by engaging in this alleged fraudulent scheme, Walgreens failed to uphold this duty, and that by basing its profits in this collusion with a third party, created a blatant conflict of interest that harmed its customers.

Read more about the lawsuit against Walgreens.

About Hagens Berman

Hagens Berman Sobol Shapiro LLP is a consumer-rights class-action law firm with offices in 10 cities. The firm has been named to the National Law Journal's Plaintiffs' Hot List eight times. More about the law firm and its successes can be found at Follow the firm for updates and news at @ClassActionLaw.

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