Pharmacy loyalty program results in $50 million settlement

The U.S. Attorney for the Southern District of New York recently announced that a $50 million settlement has been reached in a civil fraud lawsuit against Walgreens Co. The settlement resolves allegations that Walgreens violated the federal Anti-Kickback Statute (AKS) and the False Claims Act (FCA) by enrolling beneficiaries of government healthcare programs into its Prescription Savings Club (PSC) program. 

The PSC program operated by Walgreens is similar in nature to loyalty programs offered by many businesses throughout the nation today. The program called for its members to receive discounts and other incentives when they utilized Walgreens for their prescription drug needs. The program’s goal was to incentivize Walgreens’ customers to choose and utilize Walgreens over its competitors. Given the ubiquitous nature of such programs, it can be overlooked that such incentives can constitute a kickback when provided to beneficiaries of government healthcare programs, even if the program is operated successfully and legally for customers who are not beneficiaries of government healthcare programs. While it is ordinarily impermissible to treat enrollees of government healthcare programs differently than other customers, in this instance, that is what the law required.

What’s more, Walgreens recognized that allowing beneficiaries of government healthcare programs to participate in the PSC program would not be consistent with the mandates of the AKS and the FCA. Accordingly, Walgreens had enacted a company policy against allowing Medicare and Medicaid beneficiaries to enroll in the PSC program. However, despite the existence of such policy, Walgreens nevertheless appeared to market the program to all of its customers, including Medicare and Medicaid beneficiaries. The company even paid bonuses to employees for enrolling such individuals into the PSC program.

This case serves as a reminder that illegal kickbacks can, and oftentimes do, take the form of a discount as opposed to a direct monetary payment. As a result, all healthcare providers must be diligent to actively monitor any discount or loyalty program they administer to ensure that the AKS and the FCA are not violated. In addition, the case demonstrates that having appropriate policies in place are only part of the battle. Proper steps must be taken to ensure the policies are actively monitored, and compliance with such policies is required throughout the organization. Otherwise, these policies will only serve as proof that the organization knew the correct course of action, yet failed to comply.