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How Walgreens Contributed to the San Francisco Opioid Crisis

Story Highlights

Pharmacy giant Walgreens has been found to be contributing to the severe opioid crisis in San Francisco, according to a federal court ruling. Despite this, analysts still see some upside potential in the stock.

Walgreens Boots Alliance (NASDAQ: WBA) recently came into the spotlight when U.S. District Judge Charles Breyer ruled that Walgreens contributed to the San Francisco opioid crisis. The federal judge said that the pharmacy giant distributed more than 100 million prescription opioid pills in San Francisco between 2006 and 2020, failing to properly investigate a significant number of “suspicious” orders of prescription drugs, per a Los Angeles Times report.

The amount that will be slapped on Walgreens against this lawsuit will be determined in a later trial.

In response to the federal judge’s ruling, Walgreens spokesman Fraser Engerman has mentioned that “We never manufactured or marketed opioids, nor did we distribute them to the ‘pill mills’ and internet pharmacies that fueled this crisis,” according to a Reuters article.

San Francisco has been dealing with a very severe opioid crisis as the statistics speak of its ordeal loud and clear. The emergency rooms for opioid cases tripled to 2,998 in 2020 from 886 in 2015, per a Reuters article. In the same period, opioid-related overdose deaths surged by around 500% in San Francisco, according to a MarketWatch article. 

A public nuisance lawsuit was filed by the city and county of San Francisco against Walgreens and a number of other companies, including opioid makers Teva Pharmaceutical (TEVA), Allergan, and distributor Endo Pharmaceuticals in 2018. Other distributors like McKesson (MCK), AmerisourceBergen (ABC), and Cardinal Health (CAH), along with drugmaker Johnson & Johnson (JNJ), were also named in the lawsuit.

Apart from the pharmacy giant, other companies settled the lawsuit for $114 million with San Francisco, including $54 million paid by the opioid makers, per a MarketWatch article.

Is WBA a Good Stock to Buy, Nonetheless?

Turning to Wall Street, analysts seem to have mixed feelings about WBA, which has a Hold rating based on nine Holds and one Sell. The average WBA price target of $43.70 implies 8.14% upside potential. Shares of the stock have declined about 23% so far in 2022.

However, financial bloggers are 84% Bullish on WBA. Hedge funds also have positive sentiment toward the stock, as they have collectively bought 269,900 shares of WBA in the last quarter.

Does Walgreens Stock Pay a Dividend?

Walgreens pays an enticing dividend, yielding about 4.9%. Here’s a pictorial snapshot showing the company’s dividend history over the past few quarters:

Conclusion: Walgreens Fighting a Long Opioid Battle

Walgreens is facing multiple lawsuits related to the opioid crisis in the United States. Walgreens, CVS (CVS), and Walmart (WMT) pharmacies were held responsible for contributing to the opioid crisis in two Ohio counties. In a similar lawsuit, Walgreens agreed to pay $683 million over 18 years for a settlement with the state of Florida. Apart from this, the company is also facing lawsuits in Michigan, Alabama, and New Mexico, among other states.

Studying the scenario, it seems like Walgreens is fighting a long battle that can not only cause significant financial damage but also tarnish the company’s reputation.

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