Kmart to Pay Over $84K for Medicaid Overbilling

Attorney General Doug Chin, along with other states and the federal government, announced today that the Kmart Corporation, owned by Sears Holdings Management Corporation, agreed to settle allegations that Kmart charged the Hawai‘i Medicaid program more than its usual and customary charge for certain drugs.

Under the settlement agreement, Kmart agreed to pay a total settlement of $84,192.68 to resolve the overbilling allegations in Hawai‘i. Settlement proceeds will be shared between the federal and state government.

The Hawai‘i Medicaid Fraud Control Unit in the attorney general’s office worked with several states’ Medicaid Fraud Control Units and the U.S. Department of Justice to resolve these allegations impacting the State of Hawai‘i between Sept. 1 and Dec, 31, 2014.

In the mid-2000s, Kmart, along with many other pharmacies, began offering discounted generic drugs to their cash-paying customers (typically $4 for a 30-day supply). Kmart then began 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 healthcare 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.

“Thanks to the work of the Medicaid Fraud Control Unit in Hawai‘i and elsewhere, state and federal taxpayer dollars have been recovered,” Attorney General Chin said.