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September 18, 2013

Walgreens Shareholder Lawsuit: Motley Rice appointed co-lead counsel in litigation following historic DEA settlement

On Sept. 12, 2013, Motley Rice LLC was appointed co-lead counsel in In re Walgreens Co. Derivative Litigation, a consolidated shareholder derivative action brought by the court-appointed co-lead plaintiffs, a group of institutional investors, against the board of directors of Walgreen Co. (Walgreens).

The litigation follows an unprecedented $80 million settlement, announced in July 2013, among Walgreens, the Drug Enforcement Agency (DEA) and the Department of Justice (DOJ) to resolve allegations that Walgreens violated federal law governing the distribution of prescription painkillers such as oxycodone. The settlement is the largest in DEA history.

In connection with the settlement, the DEA found that certain actions by Walgreens pharmacists and the company’s leadership were taken in “staggering disregard” of Walgreens’ obligations under the Controlled Substances Act (CSA). Drawing on hundreds of exhibits and numerous witnesses, the DEA alleged that corporate officials at Walgreens implemented bonus programs that incentivized pharmacists to sell controlled substances such as oxycodone and ignored “red flags” that customers were diverting these drugs to illegal purposes. According to the DEA, “Walgreens’ alleged failure to sufficiently report suspicious orders was a systematic practice that resulted in at least tens of thousands of violations and allowed Walgreens’ retail pharmacies to order and receive at least three times the Florida average for drugs such as oxycodone.”

In addition to Walgreens’ agreeing to pay the $80 million civil penalty, the settlement requires Walgreens to surrender its DEA registrations at the company’s Jupiter, Fla., distribution center and six retail pharmacies, banning them from distributing or dispensing oxycodone and similar controlled substances until 2014. According to the DEA, Walgreens also agreed to “no longer monetarily or otherwise compensate its pharmacists based on the volume of prescriptions filled.”

The pending shareholder derivative lawsuit alleges that Walgreens’ board of directors breached their fiduciary duties by authorizing, acquiescing in and/or willfully turning a blind eye to Walgreens’ substantial and systematic violation of federal and state law, including the CSA, despite repeated warnings from the DEA, DOJ and state and local law enforcement officials.

Motley Rice serves as co-lead counsel in the case and is working closely with co-counsel Labaton Sucharow LLP and Cohen Milstein Sellers & Toll PLLC. The litigation is pending before the United States District Court for the Northern District of Illinois. For more information about this case and shareholder derivative litigation, contact Motley Rice securities attorneys Gregg Levin or Bill Norton.