Walgreens Must Again Face DOJ’s Virginia Medicaid Fraud Suit

Walgreen Co. will again face a False Claims Act suit alleging that it improperly received hundreds of thousands of dollars from Virginia’s Medicaid program by submitting false claims for hepatitis C drugs, the Fourth Circuit said Tuesday.

A district court found that federal and Virginia prosecutors failed to sufficiently allege that the purported misrepresentations in Walgreens’ reimbursement claims were material under the FCA. The drugs should have been covered by Medicaid regardless of the information on the allegedly falsified records, the district court said.

But the governments plausibly alleged facts that establish materiality as required by the US Supreme Court in Universal Health Services Inc. v. United States ex rel. Escobar, Chief Judge Albert Diaz said in a decision to reverse.

The June 2021 complaint said that Walgreens, acting through Kingsport, Tenn., store manager and pharmacist Amber Reilly, presented materially false information to the Virginia Department of Medical Assistance Services. Reilly’s records alteration scheme caused Virginia Medicaid to improperly approve authorization requests worth at least $793,909 that Walgreens didn’t return, the complaint said.

The Virginia department and its decisionmakers allegedly rejected claims when patients truthfully stated they didn’t satisfy Virginia eligibility requirements, and they approved the claims for those patients only after Walgreens allegedly doctored documents to indicate compliance, the Fourth Circuit said.

Taking those allegations as true, they show that Walgreens’ misrepresentations influenced decisionmakers within the department, the Fourth Circuit said.

The act of falsifying records to feign compliance with Medicaid requirements indicates that Walgreens thought those requirements were material to government payment decisions, the court said.

The governments sued Walgreens in June 2021.

The US District Court for the Western District of Virginia dismissed the suit in December 2021, stating that the complaint’s allegations show Walgreens received payment for medications that had been properly prescribed to Virginia Medicaid enrollees, who received the medication, and for which Walgreens was entitled to be reimbursed under the federal statute governing Medicaid funds.

Reilly pleaded guilty to one count of healthcare fraud contained in a federal information in October 2016, and was sentenced to 16 months in prison in June 2017.

Judges James Andrew Wynn and A. Marvin Quattlebaum Jr. joined in the decision.

Gibson, Dunn & Crutcher LLP represented Walgreens.

The case is United States v. Walgreen Co., 4th Cir., Nos. 22-1491, 22-1492, 8/15/23.