Today, Monday April 21, 2025, DOJ announced Friday’s FCA $350 million, “ability to pay” settlement with Walgreens to resolve civil allegations brought by the federal government and multiple whistleblowers under the False Claims Act (FCA) and the Controlled Substances Act (CSA). The agreement, filed on April 18, 2025, in the Northern District of Illinois, marks one of the more complex and carefully structured FCA settlements in recent years—one that reflects both the scale of alleged misconduct and the evolving tools of government enforcement. You can find the Settlement agreement here: https://www.justice.gov/opa/media/1397186/dl?inline
The Conduct at Issue
At the heart of the case are allegations that Walgreens filled prescriptions for controlled substances that should never have been dispensed. The government contended that, over nearly a decade—from October 2013 through March 2023—Walgreens pharmacies repeatedly filled prescriptions for opioids and other controlled medications that were not issued for a legitimate medical purpose or were otherwise outside the usual course of professional practice. In some cases, the prescriptions allegedly came from prescribers known to be acting unlawfully.
This conduct, the government claimed, not only violated the CSA, but also gave rise to false claims when Walgreens sought reimbursement from federal healthcare programs—including Medicare, Medicaid, TRICARE, and the Federal Employees Health Benefits Program—for those prescriptions. Under the FCA, billing the government for services that are not medically necessary or not lawfully provided can amount to fraud.
The allegations originated in a set of qui tam lawsuits, consolidated under the lead case United States ex rel. Novak v. Walgreens Boots Alliance, Inc., with whistleblowers playing a central role in bringing the facts to light.
A Complex Financial Settlement
The base amount of the “ability to pay’ settlement—$300 million—represents a substantial civil recovery. But the final figure will be higher. Interest, which began accruing in October 2024 at a rate of 4% annually, is projected to add over $50 million, bringing the total to more than $350 million.
What sets this agreement apart is its structure. Rather than a single lump-sum payment, Walgreens will make staggered payments over six years, beginning in May 2025 and continuing through 2031. An upfront payment of $20 million is due within three weeks of the agreement’s effective date, with the remainder spread across a fixed schedule.
In a relatively novel move for FCA settlements, the agreement includes up to $50 million in contingency payments, tied to Walgreens’ publicly reported free cash flow between 2028 and 2031. If its free cash flow exceeds specified thresholds—beginning at $1.65 billion—additional payments kick in. There’s also a trigger for a “qualifying transaction”: if Walgreens is sold or merges during the covered period, the full $50 million contingency becomes immediately payable (less any amount already paid under the contingency provision). Notably, Walgreens may prepay any part of the settlement without penalty.
Distinctions That Matter: Penalties Versus Restitution
The $300 million in principle is evenly split: half is designated as civil penalties under the CSA; the other half is classified as FCA damages. That latter amount is considered restitution to the United States. This distinction carries weight—particularly for the whistleblowers. Under the FCA, relators are only entitled to a share of funds recovered as restitution.
In this case, the lead relator, T.J. Novak, is set to receive 17.25% of the FCA portion of the settlement—including a proportionate share of interest and any performance-based contingency payments. His total award could exceed $30 million, depending on future financial events. Other named relators—Elmer Mosley, Patrick Awa, and K&V Group—are not entitled to a share of the government’s recovery, though Awa retains separate retaliation claims, which remain unresolved.
What Walgreens Gets—and What It Doesn’t
In return for its payment, Walgreens obtains a civil and administrative release from the federal government for the conduct defined in the agreement. This includes alleged violations of the FCA and CSA, as well as claims under the Civil Monetary Penalties Law and various common-law theories such as unjust enrichment and payment by mistake.
Several key agencies—among them the Department of Health and Human Services Office of Inspector General (OIG-HHS), the Defense Health Agency, and the Office of Personnel Management—also agreed not to pursue permissive exclusion or debarment based solely on the covered conduct.
But the government was careful to preserve a broad array of enforcement options.
The agreement does not release Walgreens—or any individual officers, directors, or employees—from criminal liability. Nor does it shield the company or its affiliates from mandatory exclusion from federal healthcare programs, should such exclusion be legally required under the facts. It also leaves untouched any tax liability, liability based on other conduct outside the defined period, or obligations created by the settlement itself.
Safeguards for the Government
The agreement contains several provisions designed to protect the government’s ability to collect and enforce the settlement. Walgreens warranted the accuracy of its financial disclosures during settlement negotiations. If it turns out those disclosures were materially false—defined here as a change in net worth exceeding $50 million—the government may rescind the deal or seek to recover the full settlement amount plus the value of undisclosed assets, doubled.
In the event of a payment default, the remaining balance becomes immediately due with 12% interest, and Walgreens may face exclusion from federal programs. If Walgreens files for bankruptcy before paying in full, the United States may rescind its releases and assert a claim exceeding $1.1 billion—a figure that reflects both penalties and estimated treble damages under the FCA.
The agreement also bars Walgreens from seeking reimbursement from federal programs for the settlement itself or related compliance and legal costs. These amounts are defined as “unallowable costs,” which Walgreens must exclude from any past or future submissions to the government.
Looking Ahead
This is, in many respects, a well-crafted settlement. It spares Walgreens the cost, delay, and risk of litigation while securing a substantial recovery for the government. But it’s also a warning shot. Civil settlements, especially in the healthcare space, are no longer one-dimensional. They’re complex instruments—calculated to resolve past conduct while preserving leverage for future enforcement.
