SPRINGFIELD — Illinois has joined with other states and the federal government to settle allegations that Kmart Corporation, owned by Sears Holdings Management Corporation (Kmart), charged the Medicaid program more than its usual and customary charge for certain drugs. Under the settlement agreement, Kmart agreed to pay a total settlement of $1,062,893.81 to resolve the over-billing allegations in Illinois. The settlement proceeds will be shared between the federal and state government.

In the mid-2000s, Kmart, along with many other pharmacies, began offering discounted generic drugs to their cash paying customers (typically $4 for a thirty day supply). Kmart began its Retail Maintenance Program (RMP) by charging $15 for a 90 day supply. The program was later expanded to include 30 and 60 day supplies. Although some pharmacies with similar programs gave federal health care programs the benefits of these prices, it was alleged that Kmart did not. Rather, Kmart billed and received $5 from Medicaid for a prescription that cash paying customers could purchase for $4. As a result of Kmart?s actions, Kmart received reimbursement amounts from Medicare, Medicaid and other federal healthcare programs that were higher than it was entitled to receive in violation of federal and state false claims statutes.

The settlement arises out of a qui tam lawsuit currently filed in the United States District Court for the Southern District of Illinois, “United States et al., ex rel. James Garbe v. Kmart Corporation, Civil Action No. 3:12-cv-00881-MJR-PM.” The lawsuit alleged that Kmart was submitting false claims when it charged federal health care programs higher prices than it was charging cash paying customers. The premise of the claim is that the federal government and virtually every state Medicaid program requires that a provider charge no more than its ?usual

and customary? rate for a good or service. Therefore, when Kmart billed

and received $5 for a prescription that cash paying customers could

purchase for $4, the lawsuit claimed that Kmart was falsely representing

the usual and customary rate. The parties, working with several states

Medicaid Fraud Control Units and the United States Department of Justice,

entered into a settlement agreement that allowed Illinois to be a party to

the settlement and resolve these allegations for the time period of

Sept. 1, 2004 through Dec. 31, 2014.

“The Illinois State Police Medicaid Fraud Unit is pleased with the

announcement of this settlement. Deceptive practices like this hurt the

citizens of Illinois,” said Captain Brian Ley of the Illinois State

Police. “The ISP is committed to protecting the integrity of Illinois’s

Medicaid system and will work tirelessly to that end,” he added.

The Illinois State Police, Medicaid Fraud Control Bureau, participated in

the investigation and settlement. The investigation, coordinated with the

United State Attorney’s Office for the Southern District of Illinois, was

investigated by the Illinois State Police Medicaid Fraud Control Bureau.

Assistant Bureau Chief Elizabeth Lepic served on the National Association

of Medicaid Fraud Control Units (NAMFCU) settlement team.



— Submitted by Illinois State Police

Public Information Office