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Volume XII, Number 341

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Seller Beware—Considering How Walgreens’ Liability for the San Francisco Opioid Epidemic Applies to Retail Pharmacies Everywhere

In a case sure to send retail pharmacy corporate-types scurrying to board room meetings to ensure their bases are covered, a Northern District of California federal judge held that Walgreens’ Co.’s 15 year-long pattern of filling opioid prescriptions for customers without performing adequate due diligence as to the medical legitimacy of the prescription substantially contributed to the opioid crisis in San Francisco. As a result, Walgreens must—to a degree later to be decided in court—abate the opioid crisis in San Francisco that it helped to create. While the scope of Walgreen’s court-mandated abatement is not yet known, the fact that a retail pharmacy was held to be at least partially liable for the down-the-line harm stemming from its customers’ misuse of the prescriptions it fills is a headline holding, carrying with it the potential to raise the stakes of the everyday retail pharmacy work of filling prescriptions. In good news for other retail pharmacies generally and for Walgreens retail pharmacies in other states, the holding turned on two hinges that could swing the door of liability shut in other scenarios: 1) the habitual, 15 year-long practice of San Francisco Walgreens of skirting the due diligence required of them under the federal Controlled Substances Act (“CSA”), and 2) the application of California-specific nuisance law that many other states have yet to apply in the same way.

The judge relied on a combination of the federal CSA and California public nuisance law to find Walgreens liable for San Francisco’s opioid crisis. The overall holding is that Walgreens’ failure to comply with the CSA constituted a public nuisance under California nuisance law, making Walgreens responsible for abating the nuisance it helped create. Under the CSA, as a dispenser of prescription opioids, Walgreens has regulatory obligations to take reasonable steps to prevent the drugs they dispense from being diverted and harming the public. In practice, this requires Walgreens pharmacists to resolve red flags related to the opioid prescriptions they are asked to fill that indicate that the prescriptions are not medically legitimate. If a pharmacist cannot resolve the red flag(s), the pharmacists should not dispense the prescription. The judge found that from 2006 to 2020, Walgreens pharmacies dispensed hundreds of thousands of opioid prescriptions without fulfilling their statutorily required due diligence obligations; Walgreens created a culture where pharmacists lacked the time, staffing, and resources necessary to actually investigate red flags before dispensing the drugs requested in a medically illegitimate prescription, leading to the dispensation of millions of opioid pills for non-medical use. In one particularly striking fact, an expert found that Walgreens pharmacists failed to perform the statutorily required due diligence in at least 95% of the 2,265 red-flag prescriptions she reviewed, and the testimony indicated that this same statistic could be extrapolated to the rest of prescriptions filled by San Francisco Walgreens during the 15 year time period. This violation of the CSA served as the “unreasonable conduct” necessary to constitute a public nuisance (see paragraph below). The judge made clear that Walgreens’ liability rested on its consistent, 15 year violation of the CSA rather than any type of generalized, non-statutory “unreasonable misconduct.” As a result, other retail pharmacies—whether in California or other states—can protect themselves from exposure for misuse of the opioid pills they prescribe by ensuring that they follow their required due diligence obligations under the CSA.

California public nuisance law requires a showing that Walgreens had knowledge that its unreasonable conduct caused a substantial interference with a right common to the public. Unlike many other states where nuisance law does not reach injuries to health stemming from the sale, marketing, and distribution of products but instead only applies to harm done to land or property, California nuisance law has consistently defined nuisance broadly. In California, unreasonable conduct that causes injury to health or that might interfere with the comfortable enjoyment of life or property are considered adequate acts to impose liability under nuisance law. This broad application of nuisance law to encompass injuries to health derived from the sale of products is one that other courts have expressed concerns about because it would invite litigation against any product with a known risk of harm (think a sugary drink such as soda that has been linked with type 2 diabetes when consistently consumed). The reticence of the courts of other states to apply nuisance law to injuries to health makes this result particular to California and not readily-transferable to states with a more limited application of the law of public nuisance. As such, retail pharmacies in other states worried about their exposure to liability for opioid prescriptions under nuisance law can check if their state applies nuisance law broadly like California, or narrowly as is more traditional—protecting them from liability under a nuisance law theory.

Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.National Law Review, Volume XII, Number 249
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About this Author

Reed M. Bartley Dallas Real Estate Attorney Hunton Andrews Kurth
Associate

Reed Bartley is an Associate at the Dallas office of Hunton Andrews Kurth. Reed represents a multitude of clients with their commercial real estate transactions around the United States. He focuses his practice on commercial real estate, including acquisitions, dispositions, development, financing and leasing of commercial real estate.

214-979-2955
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