Walgreens has agreed to pay $35 million to 42 states to settle allegations that it unlawfully overcharged consumers by switching drugs in a whistleblower filed by a pharmacist, Bernard Lisitza, who has successfully brought similar charges against CVS and Omnicare in the past. (Here is the settlement agreement, the corporate integrity agreement and the Walgreens statement).

According to his lawsuit, Walgreens illegally switched between tablets and capsules of generic Zantac and generic Prozac in order to charge up to 400 percent more to Medicaid. “Bernie wanted the government to know that the drug switching programs he observed were schemes to increase pharmacy profits at taxpayers’ expense,” Michael Behn, his attorney, says in a statement.

“Switching medication from tablets to capsules might seem harmless, but when that is done solely to increase profit and in violation of federal and state regulations that are designed to protect patients, pharmacies must know that they are subjecting themselves to the possibility of triple damages, civil penalties and attorney fees,” Patrick Fitzgerald, US Attorney for the Northern District of Illinois, in a statement. “These penalties, coupled with the willingness of insiders to report fraud, should deter such misconduct, but when it doesn’t, the result in this case and others serves notice that we will aggressively pursue all available legal remedies.”

“After reporting the drug switching scheme at Omnicare and being fired for his troubles, Bernie could only find temp work hours away from home,” Behn says. “While temping, he was shocked to discover that Walgreens and CVS were doing the same thing.” He describes Lisitza as an “old-fashioned corner pharmacist.”

Prior generic drug switching cases filed by Lisitza resulted in a $37 million settlement earlier this year with CVS Caremark and a $50 million settlement in late 2006 with Omnicare, the nation’s largest pharmacy for nursing homes. Whistleblowers can receive between 15 and 30 percent of the government recovery.