Walgreens to pay Humana $360M to settle claims it ‘unlawfully inflated’ drug prices
The pharmacy chain and the insurer have been in a dispute since 2019 over Walgreens' pharmacy savings club, which charged the underinsured lower drug prices but allegedly billed Humana the standard rates.
Walgreens has settled a long-running compensation dispute by agreeing to pay $360 million to Humana. This amount is roughly half of what Walgreens originally was ordered to pay when the issue was first resolved last year. The agreement was reached in late December, the retail pharmacy said in a Securities and Exchange Commission filing, and it already has paid $150 million of its obligation.
Humana initiated the arbitration process in 2019, alleging that Walgreens had spent more than a decade overcharging it for medications because the pharmacy chain “unlawfully inflated” prices for prescription drugs. A major factor was Walgreens’ pharmacy savings club, which is designed to connect uninsured or underinsured people with lower prices on drugs. When submitting reimbursement claims to Humana, the pharmacy chain recorded the standard retail prices for the drugs dispensed under this program as its “usual and customary” rates rather than the special prices, Humana alleged. Walgreens denied any wrongdoing, saying its contracts with Humana require it to report standard retail prices, not special rates available only to members of a fee-based club.
Last March, an arbiter ordered Walgreens to pay Humana a $642 million award, which the retailer challenged in federal court. In a lawsuit filed in May, Walgreens said the arbitration “began in betrayal and ended in a miscarriage of justice.” It argued that it should not have to pay that amount “when no ordinary reader of the contract at issue would find that Walgreens had done anything wrong and when the evidence showed Humana was fully aware of Walgreens’ approach and did nothing until solicited by conflicted counsel.” In a separate May filing, Humana asked the judge to uphold the $642 million award.
U.S. District Judge Ana Reyes dismissed Walgreens’ federal lawsuit on Friday, the day after the SEC filing. However, despite the more favorable settlement, Walgreens still is defending itself against a number of lawsuits alleging it inflated prescription drug claims, including one from a group of Blue Cross Blue Shield plans.
Related: Walgreens agrees to pay $16 million in Medicaid overbilling lawsuit
Walgreens has been hit with a number of expensive settlements over the past few years, including with several states over its role in the opioid epidemic that total billions of dollars. These settlements have contributed to Walgreens’ worsening financial health, although analysts have said the company’s new management team seem to have a clearer idea of how to drive growth coming in 2024.