Missouri will audit Walgreens stores for three years

KANSAS CITY, Mo. -- An independent auditor will act as a "baby sitter," performing random price checks at Walgreen Co. stores around Missouri for the next three years under an agreement the company reached with the state, Missouri Attorney General Chris Koster said Wednesday.

Under the agreement, Walgreens will pay for the audit inspections of at least 25 percent of its Missouri stores each quarter for the next three years, Koster said. The announcement comes less than a year after Missouri filed a lawsuit in Jackson County accusing the Chicago-based drugstore chain of deceptive pricing.

"Having a baby sitter over a major national corporation is an unprecedented penalty," Koster said. "To do it for three years has never been done before that I'm aware of in the country."

The Missouri investigation began after consumers complained that display tag prices didn't match what they paid at checkout. Koster's office sent investigators to Walgreen stores in Missouri and found that of about 200 items they bought, 43 had price discrepancies ranging from a few cents up to $15.

The settlement also includes penalties if Walgreens stores fail the audit inspections, which require at least 98 percent pricing accuracy, Koster said. Walgreens would pay the state $1,500 for stores that fail a first inspection, $3,000 for failing a second inspection and $5,000 for failing inspections after that.

Koster said he also would announce when stores fail audit inspections.

"My hope is that the combination of audits, financial penalty and public shaming will give Walgreens executives a strong incentive to clean up their act," Koster said.

Walgreen spokesman Jim Graham declined to discuss Koster's characterization of its pricing.

"We are pleased to have reached an agreement with the Attorney General that allows us to continue to operate within our previously established business practices," Graham said in an email. "These practices are consistent with our 113-year history of acting in our customers' best interests and ensuring their trust."

In 2013, Walgreens agreed to pay more than $1.4 million in civil penalties and to establish a price guarantee program in California after four counties sued. Also in 2013, the company paid nearly $30,000 to settle claims that it scanned inaccurate prices and didn't post refund notices at Wisconsin stores.

Koster said a lump-sum payment may not have addressed the issue.

"Walgreens would have loved to have signed a check to get out of this, and that's exactly what they did in other states where they got in trouble," he said. "Under this agreement they're going to go through 625 audits over the next three years, which is an unprecedented solution to this problem."