DOJ Sues Walgreens Over Alleged Unlawful Opioid Prescriptions, Highlighting Ongoing Industry Challenges

The U.S. Department of Justice (DOJ) has filed a lawsuit against Walgreens, one of the nation's largest pharmacy chains, alleging the company unlawfully dispensed millions of prescriptions for controlled substances, including opioids. This legal action marks the latest development in the ongoing scrutiny of the pharmaceutical industry's role in the opioid crisis.

DOJ Allegations and Potential Penalties

The lawsuit, filed in an Illinois district court, accuses Walgreens of violating the Controlled Substances Act and the False Claims Act from August 2012 to the present. According to the DOJ, Walgreens filled prescriptions for "dangerous and excessive quantities" of opioids, early refills, and the so-called "trinity" combination of drugs (an opioid, a benzodiazepine, and a muscle relaxant) despite clear red flags indicating their illegality.

The government's complaint alleges that Walgreens ignored internal data and evidence from its pharmacists, systematically pressured staff to dispense prescriptions quickly, and fostered a corporate culture that discouraged thorough verification of suspicious prescriptions. If found liable, Walgreens could face civil penalties of up to $80,850 per unlawful prescription under the Controlled Substances Act, as well as treble damages and penalties for prescriptions reimbursed by federal healthcare programs in violation of the False Claims Act.

Walgreens' Response and Industry Impact

In response to the DOJ's lawsuit, Walgreens filed a countersuit on the same day, seeking clarity from the court on the responsibilities of its pharmacies and pharmacists. The company argues that the DOJ's case is based on "arbitrary rules" that were not properly established through required rulemaking processes. Walgreens maintains that its pharmacists have acted professionally and in accordance with all applicable laws and regulations.

This legal action against Walgreens is not isolated within the industry. The DOJ has filed similar lawsuits against other major pharmacy chains, including CVS in December and Rite Aid in 2023, alleging comparable violations related to opioid prescriptions. These cases underscore the ongoing challenges faced by pharmaceutical retailers in navigating the complex landscape of controlled substance dispensation and their potential liability in the opioid crisis.

Financial Implications and Settlement Prospects

The lawsuit comes at a challenging time for Walgreens, which has already agreed to pay nearly $6 billion to settle previous opioid-related suits. As of November, the company reported a $6.6 billion liability to cover obligations related to opioid settlements. The potential financial impact of this new DOJ lawsuit could be substantial, although analysts suggest that a settlement is likely and may be significantly lower than the maximum penalties outlined in the complaint.

Charles Rhyee, an analyst at TD Cowen, predicts that a settlement between Walgreens and the DOJ will ultimately be reached, potentially "well below $1 billion." This projection is based on the outcomes of similar cases, such as the recent Rite Aid settlement of $409.3 million, which was influenced by the company's bankruptcy proceedings.

The pharmaceutical industry continues to grapple with the fallout from the opioid crisis, with this latest legal action against Walgreens serving as a reminder of the ongoing scrutiny and potential financial liabilities faced by major players in the sector. As the case progresses, it will likely have significant implications for how pharmacies dispense controlled substances and the level of diligence required in verifying prescriptions.