US pharmacy store chain Walgreens has reached a settlement with the Office of the Attorney General (OAG) over an investigation into illegal price gouging [the practice of increasing the price of goods, services or commodities to a level much higher than is considered reasonable or fair] of baby formula. 

The OAG found that Walgreens made 2,400 individual sales of formula at inflated prices during a shortage in 2022, bringing in $150,000 in revenue. 

The crisis was exacerbated by the closure of an Abbott Laboratories plant on 17 February 2022 due to contamination concerns. The facility produced 20% of the US baby formula supply.

The facility’s closure and product recall by Abbott, the global supply chain crisis and stockpiling by consumers led to an acute shortage of baby formula in the US.

The investigation was taken up following reports from consumers on Walgreens’ price gouging on at least 20 infant formula products. Walgreens raised its prices by more than 20% and in at least one case by more than 70%. 

Walgreens has neither admitted nor denied the findings and is willing to compromise to avoid litigation. 

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The company has agreed to pay a $50,000 penalty and to avoid any future price gouging practices. 

New York Attorney General Letitia James also secured 9,500 cans of baby formula from the retailer for donation to families in New York.  

The donated formula, estimated at $200,000 in wholesale value, will be distributed by the Met Council in Queens County, FeedMore WNY and the Buffalo Prenatal/ Perinatal Network in Erie County. 

Attorney General James said: “Baby formula is the main source of nutrients and absolutely essential for thousands of our most vulnerable residents, our infants. During the formula shortage, families were panicked and struggling about how to feed their babies. For Walgreens to take advantage of this crisis and jack up formula prices is not only illegal, but downright shameful. 

“The thousands of baby formula cans secured by my office will go directly to help New York families who need it most. Today’s agreement should also send a clear message that my office will not tolerate any company that attempts to price gouge our state’s consumers.” 

In October 2023, Walgreens Boots Alliance agreed to pay $192.5m to settle a class action lawsuit filed by investors of drugstore chain Rite Aid, Reuters has reported.