Walgreens Sues Hospital Over New In-House Pharmacy

Walgreens has filed a lawsuit against Hagerstown, Maryland-based Meritus Health after the community hospital and health system opened an independent pharmacy in the lobby of its flagship medical center.

The retail pharmacy giant alleged that by opening an 1,800-square-foot pharmacy inside Meritus Medical Center (MMC), the health system is in violation of its lease agreement, which promised no other pharmacy would be established on the Robinwood medical campus, where MMC is both located.

But Meritus claimed the 2013 lease agreement is no longer valid, since the unit currently leased by Walgreens was sold to another company and is no longer part of the Meritus portfolio.

Maulik Joshi, DrPH, president and CEO of Meritus Health, told MedPage Today that the company opened its own pharmacy for better continuity of care, to ensure that patients who are discharged can get any medications before they leave the building.

“Our mission is to improve the health of our community,” Joshi said. “We’re doing this for our community.”

In its complaint, filed May 13, Walgreens argued that selling the unit “was a bad faith attempt by Meritus to avoid having to comply with the exclusivity obligation imposed by the [lease contract].” It alleged that Meritus sold the unit to Water Street Investments LLC, whose “managing member … is a physician affiliated with Meritus.”

Joshi said the physician “to which we believe the complaint refers … is a community physician (not employed) with Meritus medical staff membership. Almost all the community physicians have medical staff membership and/or privileges at the hospital.”

In a press release shared with MedPage Today, Joshi called the lawsuit a “tough pill to swallow.” The release noted that “Walgreens is one of the largest for-profit corporations in the country, and, according to their Q2 2022 SEC filing, had Net Earnings of over $4.3 billion for the six months ending February 28, 2022.”

Joshi said Meritus is a 100-year-old independent, non-profit community organization, with the 327-bed MMC as its flagship facility on the Robinwood campus. The system is the sole provider for Washington County, Maryland, which has more than 150,000 residents.

Walgreens argued in its complaint that it will suffer “substantial, immediate, and irreparable harm” due to the new pharmacy. “The operation of the Meritus Pharmacy poses a significant and substantial threat to Walgreens’ business because it directly competes with and is substantially similar to the Walgreens Pharmacy,” the complaint stated.

A spokesperson for Walgreens declined to comment for this story, given the pending litigation.

Meritus has since filed a motion to dismiss the lawsuit, alleging that Walgreens’ claims fail essentially because Meritus has been released of any obligations as landlord when the unit was sold.

“Meritus had the absolute unfettered right to sell [the unit] to a new owner without the consent of Walgreens and did so, and, upon that sale and transfer of the ownership of [the unit] to a new owner, Meritus was relieved of all obligations thereafter arising expressed in the Lease or implied by law,” the filing stated.