Walgreens (WAG) suggested its pharmacists use "one-liners" on their patients to convince them that its illegal switching of their prescriptions for the antacid tablet Zantac to a generic capsule version of the drug -- one that was up to three times more expensive, costing Medicaid (and other patients) millions of dollars -- was to their advantage because the capsules were easier to swallow, according to an unsealed whistleblower lawsuit.

On its own, this isn't news -- Walgreens already settled the allegations for $35 million in 2008 (as did Omnicare, the nation's largest pharmacy for nursing homes, for $50 million in 2006 and CVS for $37 million in 2008).

But the new suit, against capsule-maker Par Pharmaceuticals and its supplier companies, reveals the internal PowerPoint shows and emails that Par and Walgreens executives used to sell the conspiracy to its employees. When explaining why their prescriptions were being switched without their permission to a more expensive version of the drug, Walgreens director of pharmacy marketing Tom Lawlor suggested in an email that pharmacists should take advantage of "a unique opportunity to have a meaningful conversation with your patients and assure them their medication is exactly the same."

Naturally, it began with the math. Par noticed that Medicaid set price limits on its reimbursement of generic Zantac tablets (ranitidine), but there were no such limits on capsule versions of the same drug. Although for most patients there isn't much difference between a tablet and a capsule, it is illegal to change a doctor's prescription as written without the doctor's consent. The FDA makes separate approvals for tablets and capsules because it regards the two forms as unequal, different medicines.

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The differing price points for tablets and capsules were presented by Par to Walgreen in this PowerPoint analysis (click to enlarge images):



The numbers are laborious but I've highlighted the important bits in yellow. By switching to gelcaps, the price of a Zantac prescription would rise from $5.35 to $71.45, reaping Walgreens an extra $75 million in annual profits on the 1.2 million Zantac scrips it dispensed each year.

Walgreens, of course, loved this idea. The next problem, however, was how to sell this to the patients and insurers who would suddenly see their bills rise. George Riedl, Walgreen's svp/drug store marketing, asked Lawlor if he had any "one liners" pharmacists could use to sweet-talk patients into taking the new, "easy-to-swallow" caps:



Lawlor didn't disappoint. In his internal announcement of the plan he positioned this fraudulent conspiracy as a "unique opportunity":



It worked, until about 2004 when the federal government and several state attorneys general got wind of the scheme and began investigating. Then, Lawlor said in an email, Walgreens decided to "quietly" reverse the scheme:



Here's what the scheme looked like in terms of prescriptions sold. It began in 2001 with Walgreens switching 90-plus percent of all Zantac prescriptions to capsules, and was reversed when Walgreens "quietly" ended the scheme in 2004:



The case was brought by Bernard Lisitza, a whistleblowing pharmacist who has filed several successful actions.

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