Kmart Corp. paid the United States $1.4 million to resolve allegations that it violated the False Claims Act by illegally using drug manufacturer coupons and gasoline discounts to lure Medicare beneficiary to its pharmacies, the Justice Department said Tuesday.
The settlement resolved allegations in a lawsuit filed by Joshua Leighr, a former Kmart pharmacist, under the qui tam, or whistleblower provisions of the False Claims Act.
The FCA authorizes private parties to sue for fraud on behalf of the United States and share in any recovery.
Leighr will receive $248,500 from the settlement, the DOJ said.
Kmart is a discount department store chain that operates 780 in-store pharmacies throughout the United States, Puerto Rico, and the U.S. Virgin Islands.
From 2011 to 2014, the DOJ said, Kmart allowed Medicare customers to use coupons from drug manufacturers to reduce or eliminate prescription co-pays.
The company also gave Medicare customers discounts on gasoline at certain gas stations based on the number of prescriptions they filled at Kmart pharmacies.
And Kmart 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 DOJ said.
It’s illegal to offer anything to people on federal health programs like Medicare that’s intended to sway their choice of a provider.
“The United States will continue to pursue retail pharmacies that improperly attempt to influence a beneficiary’s choice of pharmacy,” Benjamin Mizer, head of the DOJ’s civil division, said.
The settlement didn’t determine liability, according to the DOJ.
The case is U.S. ex rel. Leighr v. Kmart Sears Holding Corporation and Kmart Corporation, Case No. 4:13cv00988-DGK (W.D. Missouri).
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.