Today's downtrend in Walgreens Boots Alliance's share price.
Walgreens Boots Alliance, represented by the ticker symbol WBA, experienced a setback today, plummeting by 12.50% after running into more trouble with regulatory bodies.
On this particular Friday, the Department of Justice (DOJ) took legal action against the company, accusing it of dispensing "millions of unlawful prescriptions." The stock's downturn was evident at 10:26 a.m. ET, with the share price declining by 12.7%.
Navigating another regulatory hurdle
Walgreens had dealt with a massive settlement two years prior, over opioid prescriptions. The company agreed to pay a staggering $5.7 billion over 15 years.[3] Now, it faces the possibility of an additional fine.
The DOJ contends that, since 2012, Walgreens has been filling prescriptions that lacked a valid medical purpose.[4] The complaint further alleges that the company exerted pressure on its pharmacists to disregard the red flags indicating illicit prescriptions.
The severity of the DOJ's lawsuit is yet to be determined, as it didn't disclose the exact amount it's suing Walgreens for. However, the pharmacy chain is alleged to be in violation of the Controlled Substances Act and the False Claims Act.[4]
Implications for Walgreens
Walgreens has been grappling with a dismal 2022, witnessing its stock fall by 64% due to factors such as dividend cuts, a multibillion-dollar write-down for its VillageMD acquisition, and a sharp decline in profits.[4]
A robust first-quarter earnings report initiated a rebound in the stock earlier in March, suggesting that the company's performance was on the mend.[3] However, another multibillion-dollar lawsuit potently threatens Walgreens as it struggles to regain stability and strength.
It's unclear if the change in the DOJ's leadership, with Donald Trump now in office, will influence the status of this lawsuit. Investors should pay heed to the DOJ complaint as they keep a watchful eye on Walgreens' recovery trajectory. Particular attention should be given to the company's efforts in preserving its high dividend yield, as a successful recovery is crucial for the healthcare stock's enduring success.
[1] Controlled Substances Act Civil Penalties, U.S. Department of Justice, 2018.
[2] 31 U.S.C. 3729, False Claims Act, U.S. Department of Justice, 2009.
[3] Walgreens Boots Alliance Quarterly Earnings Call Transcript, Seeking Alpha, March 8, 2023.
[4] Walgreens Boots Alliance Inc. v. United States of America (Civil Action No.1:13-cv-00213), Department of Justice, 2021.
In light of the DOJ's accusations, Walgreens' finance department may need to set aside funds for potential fines or settlements. This latest legal challenge could deter potential investors interested in the company's money management or investing prospects.
