Bloomberg News

Walgreen Investors Sue CEO Over $80 Million Painkiller Fine (1)

July 31, 2013

Walgreen Co. (WAG:US) Chairman James A. Skinner and Chief Executive Officer Gregory D. Wasson were sued by investors accusing them of failing to protect the company from an $80 million federal fine for lax oversight of prescription painkiller distribution.

The shareholders’ complaint in federal court in Chicago also names 11 board members as defendants and was filed on behalf of the company, the biggest U.S. pharmacy chain.

The penalty was paid last month to end a U.S. probe into the company’s drug distribution practices in New York, Florida, Michigan and Colorado, the U.S. Drug Enforcement Administration said in a statement. The fine was the biggest in DEA history.

“Walgreens admitted, among other things, that it had not upheld its obligations as a DEA registrant, which requires the company to report suspicious orders of prescription painkillers like oxycodone,” according to today’s complaint.

From late 2010 through mid-2011, 16 of the company’s top 25 biggest retail pharmacy purchasers of the painkiller oxycodone - - including the top six buyers -- were in Florida and being supplied by the same distribution facility in the city of Jupiter.

Those top six stores each averaged more than 1.6 million dosage purchases of the drug’s strongest prescription, while the average U.S. pharmacy during the same period bought only 73,000 units at all dosages, according to the complaint.

Board Aware

“A majority of the board was aware of these improper sales of prescription painkillers since at least 2010 and appears to have either condoned the practices or done nothing to prevent them,” the investors said.

Union pension plans from Pennsylvania, Missouri and Florida filed the complaint. They’re seeking a court determination that the executives breached their fiduciary duty to Walgreen and its owner-shareholders, restitution from the individual defendants, changes in corporate governance and board membership, plus other relief.

Jim Cohn, a spokesman for the Deerfield, Illinois-based company, said he couldn’t immediately comment on the investor’s allegations.

“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 on June 11.

Costs tied to the settlement will reduce earnings by 4 cents to 6 cents a share in the fiscal third quarter, the company said that day.

The case is Steamfitters Local #449 Retirement Security Fund, 13-cv-05471, U.S. District Court, Northern District of Illinois (Chicago).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at

aharris16@bloomberg.net

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


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Companies Mentioned

  • WAG
    (Walgreen Co)
    • $67.59 USD
    • 0.25
    • 0.37%
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