Walgreens must face Medicaid fraud lawsuit over hepatitis C drugs, says appeals court

A federal appeals court has reinstated a lawsuit against Walgreens for allegedly defrauding Virginia’s Medicaid program by falsely representing that some patients were eligible for expensive hepatitis C drugs. The decision overturned a previous ruling by a lower court.

In a 3-0 decision, the 4th U.S. Circuit Court of Appeals in Richmond, Va., cleared the way for the nation’s largest pharmacy chain to face allegations that it violated the federal False Claims Act and Virginia state law. The case arose from alleged misconduct by Amber Reilly, a clinical pharmacy manager at a Walgreens in Kingsport, Tenn.

She was accused of falsifying patient records, including lab results, between January 2015 and June 2016 to obtain prior authorization from Virginia Medicaid for reimbursement for the drugs Sovaldi, Harvoni and Daklinza. Revenue from the Kingsport store grew by 321% during that time, court records showed. O’Reilly pleaded guilty to one count of health care fraud contained in October 2016 and was sentenced to 16 months in prison in June 2017.

Walgreens began an investigation but did not repay money it received for 12 Virginia Medicaid patients, even after the manager pleaded guilty to a similar scheme in Tennessee.

In December 2021, a trial judge dismissed the lawsuit, saying Walgreens’ misrepresentations were immaterial because Virginia’s prior authorization requirements violated federal law.

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However, Circuit Judge Albert Diaz said Walgreens’ alleged misrepresentations were material under the False Claims Act because they “did, in fact, influence the decisionmakers” at Virginia Medicaid. He also said Walgreens could not escape liability by attacking Virginia’s eligibility requirements as illegal. “Allowing Walgreens to avoid liability by challenging Virginia’s eligibility criteria only after getting caught would hinder the act’s purpose of holding fraudsters accountable,” Diaz wrote.

Walgreens, the U.S. Justice Department and the Virginia attorney general’s office declined media request for comment.