Wallgreens Class Action Lawsuit Settlement

In a significant legal development, Walgreens has agreed to a $100 million settlement to address allegations of overcharging insured customers for generic medications. The lawsuit contended that Walgreens did not factor in its Prescription Savings Club (PSC) prices when determining the “usual and customary” rates reported to insurers. This omission allegedly led to inflated costs for both consumers and third-party payors.

This Walgreens class action lawsuit settlement has been a long time in coming.  This lawsuit was filed eight years ago in 2017.

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Background of the Allegations

In a lawsuit that seeks to uncover the pricing strategies of one of the largest pharmacy retailers in the United States, plaintiffs Dorothy Forth, Troy Termine, Cynthia Russo, and the International Brotherhood of Electrical Workers Local 38 Health and Welfare Fund have filed a class action against Walgreens Boots Alliance Inc. and Walgreen Co. The plaintiffs allege that Walgreens has engaged in a calculated scheme to overcharge both consumers and third-party payors for generic prescription drugs through the manipulation of “usual and customary” (U&C) prices.

The heart of the complaint revolves around Walgreens’ Prescription Savings Club (PSC), a discount program for cash-paying customers. While PSC members pay as little as $5 to $15 for 30-day supplies of generic drugs, the plaintiffs argue that insurance beneficiaries and third-party payors have been charged grossly inflated prices for the same medications.

What Is the “Usual and Customary” Price?

In the pharmacy industry, the “usual and customary” price represents the cash price charged to the general public for a specific prescription drug, excluding any insurance involvement. This price serves as a benchmark for how much third-party payors and insured customers should be charged. Federal regulations, including those governing Medicare Part D, explicitly require that a pharmacy’s U&C price must reflect the lowest price offered to customers who pay out-of-pocket.

In the class action lawsuit against Walgreens pharmacy, plaintiffs alleged that Walgreens has violated these regulations by maintaining two separate pricing systems:

1. The Discounted PSC Price: Available to cash-paying customers, often significantly lower than market prices.
2. The Inflated U&C Price: Reported to third-party payors and charged to insured customers, often many times higher than the PSC price.

The Prescription Savings Club: A Tool for Price Manipulation

Walgreens introduced the PSC program as a loyalty initiative targeting uninsured and cash-paying customers, allowing them to access significant discounts on generic medications for an annual membership fee of $20 for individuals or $35 for families. According to this Wallgreen’s lawsuit, these discounted PSC prices constituted Walgreens’ true usual and customary prices, as they reflect the price most commonly paid by cash-paying customers.

However, Walgreens allegedly withheld this lower price from insurance beneficiaries and third-party payors, instead reporting a far higher usual and customaryprice for generic drugs covered under the PSC program. This practice effectively allowed Walgreens to charge insured customers higher copayments and collect inflated reimbursements from health plans.

The Broader Context: Prescription Drug Pricing in America

With nearly 90% of Americans enrolled in health insurance plans that share the cost of medical expenses, including prescription drugs, the stakes are high. These insurance plans typically require patients to pay a portion of their prescription drug costs through copayments, coinsurance, or deductible payments, while the remaining cost is covered by third-party payors like private insurance companies or employer-sponsored health plans.

The plaintiffs argue that Walgreens deliberately inflated the usual and customary prices it reported for generic drugs covered under its Prescription Savings Club program. By law, pharmacies must charge insured customers no more than the usual and customary price for prescription drugs.

The usual and customary price is supposed to reflect the cash price offered to the general public. According to the Wallgreens class actionlawsuit, Walgreens systematically reported higher usual and customary prices for insured customers than it charged PSC participants, thereby violating federal and state regulations.

The Allegations Against Walgreens

The lawsuit asserts that Walgreens’ actions have caused consumers and third-party payors to pay significantly more for generic drugs than necessary. For example:

1. Deceptive Pricing Practices: The complaint alleges that Walgreens operated a “dual pricing scheme,” offering deeply discounted prices to Prescription Savings Club members while charging insurance-covered customers inflated prices based on falsified U&C rates.
2. Regulatory Violations: Walgreens’ practices allegedly violate federal Medicare regulations, which define U&C prices as the cash price offered to customers without prescription drug coverage.
3. Systematic Overcharges: Plaintiffs claim that Walgreens knowingly submitted inflated U&C prices for claims adjudicated through standardized prescription drug billing systems. These inflated prices increased the out-of-pocket costs for insured consumers and the reimbursement costs for third-party payors.
4. Misrepresentation and Concealment: The plaintiffs contend that Walgreens failed to disclose the existence of the Prescription Savings Clubprogram to insurance-covered customers and third-party payors, obscuring the lower prices available through PSC.

Real-Life Impacts: Plaintiff Case Studies

The lawsuit provides detailed examples of the financial harm suffered by plaintiffs:

• Dorothy Forth: A Texas resident and Medicare Part D beneficiary, Forth alleges that she was overcharged by at least $285 for PSC-listed generics, paying up to 11 times the PSC price for certain medications.
• Troy Termine: A Louisiana resident insured by Humana, Termine claims he paid over $8 more than the PSC price for his prescriptions, a significant percentage for a cash-paying customer.
• Cynthia Russo: A Florida Medicare beneficiary, Russo asserts that she was overcharged by $130 for several PSC-listed generics.
• IBEW Local 38 Health and Welfare Fund: Representing union members and their families across multiple states, this third-party payor alleges substantial overpayments for tens of thousands of generic prescriptions due to Walgreens’ pricing practices.

The National and Economic Scale

As one of the nation’s largest pharmacy chains, Walgreens filled over 928 million prescriptions in fiscal year 2016, generating $56 billion in U.S. pharmacy sales. The lawsuit argued that the alleged pricing scheme enabled Walgreens to maintain high revenue levels while exploiting consumers and third-party payors. So the profits that could be generate from this scheme for Walgreens is off the charts.

To illustrate the scope of the alleged misconduct, the Wallgreens lawsuit provides comparative data showing Walgreens’ inflated prices versus those of competitors like Walmart, Target, and ShopRite. For example, in Philadelphia, Pennsylvania, a 30-day supply of Lisinopril, a common generic medication, cost:

• $4 at Walmart
• $3.99 at ShopRite
• $18.99 at Walgreens

Similar disparities were observed for other medications across multiple states.

What Does the Wallgreens Settlement Mean to You?

Walgreens does not any wrongdoing. It never does.  But the Walgreens lawsuit settlement is whopping $100 million to resolve these claims. As part of the agreement, Walgreens terminated its Prescription Savings Club in August 2024. The settlement funds will be distributed among affected consumers and third-party payors based on their incurred costs during the specified period.

Settlement Distribution

• Total Settlement Amount: $100 million.
• Allocation:
  • Third-Party Payors (TPPs): 80% of the net settlement fund.
  • Individual Consumers: 20% of the net settlement fund.

So that is $20 million to consumers.

Individual Consumer Compensation

The specific amount each individual consumer will receive depends on several factors:

1. Total Valid Claims Submitted: The more individuals who file valid claims, the smaller the individual payout may be, as the fund is distributed among all valid claimants.
2. Amount Paid for Eligible Prescriptions: Consumers who paid more out-of-pocket for eligible prescriptions may receive a larger share of the settlement fund.
3. Deductions from the Settlement Fund: Before distribution, certain amounts will be deducted from the total settlement fund, including:
   • Attorneys’ Fees: Up to $40 million (30% of the fund).
   • Out-of-Pocket Costs and Expenses: Up to $3 million.
   • Service Awards to Plaintiffs: Up to $5,000 for individuals and $15,000 for funds.
   • Notice and Administration Expenses: Costs associated with notifying class members and administering the settlement.

After these deductions, the remaining amount will be distributed to eligible claimants on a pro-rata basis, meaning each claimant will receive a proportionate share based on their recognized claim amount relative to the total claims submitted.

Example Calculation:

If, after deductions, the net settlement fund allocated for individual consumers is $20 million, and the total recognized claims amount to $100 million, a claimant with a recognized claim of $1,000 would receive:

 

Eligibility and Claim Process

Individuals and entities in the U.S. who purchased prescription drugs from Walgreens using insurance benefits between January 1, 2007, and November 18, 2024, are eligible to file a claim. The deadline for claim submission is April 17, 2025. Proof of purchase, such as receipts or transaction records, is required. Detailed information and claim forms are available on the official settlement website:

Important Dates

• Claim Submission Deadline: April 17, 2025
• Exclusion or Objection Deadline: March 18, 2025
• Final Approval Hearing: September 10, 2025