Walgreen Pays $80 Million to Settle DEA Painkiller Probe

Walgreen Co. (WAG), the largest U.S. drugstore chain, will pay $80 million to end an investigation into whether it violated rules governing the distribution of prescription painkillers, federal officials said.

The Deerfield, Illinois-based company agreed to the payment to resolve a U.S. Drug Enforcement Administration probe of drug-distribution practices in Florida and at least three other states, the DEA said today in a statement. It’s the largest such settlement in DEA history, according to the statement.

DEA agents were looking into claims that Walgreen officials allowed prescription painkillers, such as oxycodone, to be diverted to illegal uses. Walgreen’s Jupiter, Florida-based distribution center was the largest supplier of oxycodone to retail pharmacies in the state, federal officials said.

“Walgreen pharmacists blatantly ignored red flags and filled prescriptions they knew or should have known would be illegally diverted,” Mark Trouville, a Miami-based DEA agent, said in an interview.

Costs tied to the settlement will reduce earnings by 4 cents to 6 cents a share in the fiscal third quarter, Walgreen said today in a statement. Analysts project adjusted earnings of 91 cents, the average of 19 estimates in a Bloomberg survey.

“We have worked closely with DEA over the past several months to reach this agreement, which concludes the DEA’s review of our operations,” Kermit Crawford, president of Walgreen’s pharmacy, health and wellness services businesses, said in an e-mailed statement.

Shoddy Practices

Walgreen’s agreement with the DEA comes nine months after the pharmacy chain sued the agency over its ban on shipments of controlled substances from the Jupiter facility. The DEA concluded that shoddy drug-handling practices made the facility a public-safety threat.

The ban was part of a DEA crackdown on retail pharmacies and drug distributors for high sales of oxycodone in Florida, considered by U.S. officials the epicenter of prescription drug abuse.

In May 2012, Cardinal Health Inc. (CAH), the second-largest U.S. drug distributor by revenue, agreed to suspend shipments of controlled drugs from a Florida facility for two years in a settlement with the DEA.

Federal officials contended that Cardinal’s Lakeland, Florida, distribution center posed a public-safety threat by shipping large quantities of oxycodone to pharmacies.

2.1 Million Units

In 2011, the average pharmacy in the U.S. ordered about 73,000 oxycodone dosage units. That year, the six Walgreen’s pharmacies identified as the company’s top oxycodone buyers in Florida each ordered from 1.2 million to 2.1 million dosage units, according to the DEA.

Under the settlement, the Walgreen distribution center and six Walgreen pharmacies in Florida are barred from distributing controlled substances covered by the pact for two years. The chain also agreed to beef up compliance efforts and eliminate awards to pharmacists based on the volume of prescriptions filled, DEA officials said.

The accord also ends investigations of Walgreen’s prescription practices in Colorado, Michigan and New York, the agency said.

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net; Susannah Nesmith in Miami at susannahnesmith@yahoo.com

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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