Walgreens continues to clean up on Aisle 9 before it goes private. Walgreens settled the Federal allegations around illegally filling invalid prescriptions for opioids and seeking payment from Federal programs for $300 million. There’s an additional $50 million tagged onto it if the company is sold, merged, or transferred prior to fiscal year 2032. Since Walgreens has ‘done the deal’ with Sycamore Partners, the settlement amount will be the full $350 million. According to the Department of Justice’s press release, the settlement was based on Walgreens’ ability to pay. There was no statement on when the $350 million will be due.

This settles the complaint filed on 16 January (amended 18 April) in the US District Court for the Northern District of Illinois by the Department of Justice (DOJ), the Drug Enforcement Administration (DEA), and the Department of Health and Human Services Office of Inspector General (HHS-OIG). In the suit, Walgreens faced civil penalties of up to $80,850 for each unlawful prescription filled in violation of the Controlled Substances Act (CSA), plus treble damages and applicable penalties for each prescription paid by Federal programs in violation of the False Claims Act (FCA) for over 10 years–approximately August 2012 through March 1, 2023 The red flags included prescriptions for the ‘trinity’ of an opioid, a benzodiazepine and a muscle relaxant. If Walgreens had been found guilty, the penalty could have been billions. 

Given the numbers that in January presented a large impediment to a sale, settling rather than fighting makes sense. The projected Sycamore Partners closing is only two quarters away (Q4, TTA 11 Mar). The 35-day ‘go shop’ period has closed with no other offers. The DOJ has moved to dismiss its complaint in Illinois, while Walgreens will also move to dismiss a related declaratory judgment action filed in the District Court for the Eastern District of Texas. In addition to Illinois, the District of Maryland, the Eastern District of New York, the Middle District of Florida, and the Eastern District of Virginia participated in the complaint.

In addition to the settlement, Walgreens’ pharmacy operations are now under Federal scrutiny, based on multiple agreements with DEA and HHS-OIG attached to the settlement, addressing what they and the DOJ saw as compliance violations in dispensing controlled substances. From the release:

• Walgreens and DEA entered into a memorandum of agreement that requires the company to implement and maintain certain compliance measures for the next seven years. 
• Walgreens must maintain policies and procedures requiring pharmacists to confirm the validity of controlled substance prescriptions prior to dispensing controlled substances, provide annual training to pharmacy employees regarding their legal obligations relating to controlled substances, verify that pharmacy staffing is sufficient to enable pharmacy employees to comply with those legal obligations, and maintain a system for blocking prescriptions from prescribers whom Walgreens becomes aware are writing illegitimate controlled substance prescriptions.
• Walgreens has also entered into a five-year Corporate Integrity Agreement with HHS-OIG, which further requires Walgreens to establish and maintain an extensive compliance and training program

Crain’s Chicago Business, Healthcare Finance, Settlement Agreement

Healthcare AI continues to be more show than go. A report by Bessemer Venture Partners surveying payers, pharma, and providers states that 95% of respondents said GenAI will be transformative, with 85% of provider and 83% of payer leaders expecting it to reshape clinical decision-making within three to five years. Yet only 30% of AI pilots — what the report calls “internally and externally developed GenAI proof of concept (POC) projects” make it to production. 

Generative AI applications are being developed by the organizations’ IT teams, building their own tools by partnering with horizontal AI labs (i.e., Anthropic), Big Tech companies, or going to current and new vendors. The impediments they face are cybersecurity, data readiness, integration costs, and limited in-house expertise. Procurement is shifting toward co-development; 64% of execs are open to co-developing with early-stage partners. A contradiction is that only 32% of executives believe GenAI solutions from startups are superior to those from large tech incumbents. yet 48% prefer working with startups over established players.

Yet with these “aspirations and expectations” in the 80-90th percentile, only half of the surveyed organizations surveyed have a clear AI strategy with 57% having an AI governance committee, with payers in the lead. Those in it are putting real money behind it and seeing some meaningful ROI (54%), however. 

Among the three surveyed segments, Bessemer identified 59 jobs-to-be-done. Yet 45% of these jobs are still in the ideation or POC phase, with far fewer actually in production. These jobs clustered as follows: 22 for payers (claims, network, member, pricing), 19 for pharma (preclinical, clinical, marketing, sales), and 18 for providers (care delivery, revenue cycle management). The survey was performed by Bessemer with Amazon Web Services and Bain & Company, across 400 leaders in the three segments. 

Remote patient monitoring (RPM) Medicare usage growing steadily, despite limitations on clinical effectiveness. This new report from the Peterson Center on Healthcare tracks how RPM usage has grown among Medicare (traditional, Medicare Advantage) and Medicaid beneficiaries since 2019, when CMS enabled Medicare codes for reimbursement. For Medicare, despite only 1% of beneficiaries using RPM, it grew exponentially–10-fold for traditional Medicare between 2019-2023 and 14-fold for MA between 2019 and 2022.

• Top chronic conditions are hypertension (57%) with diabetes far behind at 13%. Also growing but much smaller is remote therapeutic monitoring (RTM), dominated by musculoskeletal (MSK) disorders.
• Traditional Medicare spent $194.5 million on RPM and $10.4 million on RTM in 2023.
• Clinical effectiveness tends to be short-term. In hypertension, RPM is most valuable within the first six months, when blood pressure medications are actively monitored. For diabetes, the prime target is likely patients with the highest starting HbA1c levels and those
  who are at critical transition points in their care plan, such as starting insulin. For RTM, the most effective gains occur in 2-4 months.
• Yet utilization is increasing. The duration of continuous RPM in traditional Medicare in 2023 was 5.2 months, with 22% over nine months. For hypertension, the average is 6.6 months. For MSK RTM, the average was below effectiveness-only 1.7 months.

The Peterson Center’s policy conclusions advocate a reset:

• Coverage and reimbursement need to be better aligned to actual clinical value
• Adoption of high-impact remote monitoring services and minimizing or eliminating the use of poorly performing digital applications
• Improved data collection for remote monitoring services for evidence-based coverage and reimbursement decisions

Evolving Remote Monitoring