KMart pays $1.4 million to settle whistleblowers’ claims about pharmacy kickbacks

by Ben Vernia | September 2nd, 2015

On September 1, the Department of Justice announced that KMart Corp. has paid $1.4 million to resolve civil charges, initially brought by a whistleblower, that the company’s pharmacy provided kickbacks to customers in the form of drug company coupons and gasoline discounts. According to DOJ’s press release:

KMART Corp. (Kmart), a discount department store chain that operates approximately 780 in-store pharmacies throughout the United States, Puerto Rico and the U.S. Virgin Islands, has paid the United States $1.4 million to resolve allegations that it violated the False Claims Act by using drug manufacturer coupons and gasoline discounts as improper Medicare beneficiary inducements, the Justice Department announced today.

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The settlement resolves allegations that Kmart violated the False Claims Act by providing illegal inducements to beneficiaries of the Medicare program.  The government alleged that from June 2011 to June 2014, Kmart knowingly and improperly influenced the decisions of Medicare beneficiaries to bring their prescriptions to Kmart pharmacies by permitting the Medicare beneficiaries to use drug manufacturer coupons to reduce or eliminate prescription co-pays that they otherwise would be obligated to pay.  Federal law prohibits a person from offering beneficiaries of certain federal health programs, such as Medicare, remuneration that is intended to influence the beneficiary’s choice of provider.  The government alleged that Kmart’s conduct caused the Medicare beneficiaries to seek expensive, brand name drugs in lieu of cheaper generic drugs, which caused the government’s costs to increase without any medical benefit to the beneficiary.  The government also alleged that Kmart improperly encouraged Medicare beneficiaries to bring their prescriptions to Kmart pharmacies by offering them varying levels of discounts on the purchase of gasoline at participating gas stations based on the number of prescriptions that they filled at Kmart pharmacies.

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The government announced that the whistleblower, a former KMart pharmacist, will receive about $248,500 from the settlement (a relator’s share of about 17.8%).

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