Kmart Corporation to Pay U.S. More Than $2.5 Million to Settle False Claims Act Allegations for Partially Filled Prescriptions

Kmart Corporation has agreed to pay the United States and 32 participating states a total of $2,550,000 to settle allegations of false prescription claims by its national pharmacy centers to government health insurance programs, U.S. Attorney Barbara L. McQuade announced today.

Joining in the announcement were Special Agent in Charge Paul Abbate, Federal Bureau of Investigation, and Special Agent in Charge Lamont Pugh, Health and Human Services, Office of Inspector General (HHS-OIG).

Kmart is alleged to have violated the False Claims Act by billing government health care programs (Medicaid, Tricare, and the Federal Employee Health Benefits Program) for all drugs included in a prescription when, for many prescriptions, it dispensed only a portion of the prescribed drugs. Although billed in full to the government health care programs, the remaining portion of the prescriptions were never dispensed to beneficiaries and were later returned to stock.

In addition to the state of Michigan, the participating states and territories that will receive funds attributable to their Medicaid Programs are Alabama, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Minnesota, Mississippi, Missouri, Montana, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, West Virginia, Wisconsin, Puerto Rico, and the Virgin Islands. The settlement covers the time period from January 1, 2004 to October 17, 2005, before Kmart was purchased by Sears Holding Corporation in November 2005.

“Cases like this one help ensure that health care program funds are used for the benefit of patients and not instead lost in the bureaucracy of large pharmacies,” McQuade said.

A portion of the settlement amount will go to Mark Kirsch, to settle the qui tam or “whistleblower” complaint against Kmart Corporation. Kirsch, a former Kmart traveling pharmacist who filed the action in Detroit in the Eastern District of Michigan, will receive $309,687.

Under the False Claims Act, private individuals who bring suits against companies can receive a portion of the recovery in a case that the government joins.

This case was investigated by special agents of the Federal Bureau of Investigation and special agents of Health and Human Services-Office of Inspector General with the assistance of the Department of Defense-Office of Inspector General, Defense Criminal Investigative Service, and the U.S. Office of Personnel Management, Office of the Inspector General.