U.S. Virgin Islands — Acting V.I. Attorney General Ian S.A. Clement announces the conclusion of the distribution process for the proceeds from a 2017 Kmart Settlement. As per the terms of the agreement, a sum of $638,553.16 was disbursed to settle allegations of overbilling the U.S. Virgin Islands Medicaid Program.
The U.S. Virgin Islands Department of Justice (USVIDOJ) on behalf of the Virgin Islands Medicaid Fraud Control Unit (MFCU) reached the agreement with Kmart Corporation, a unit of Sears Holdings Management Corporation, based in Hoffman Estates, Illinois. The purpose was to settle allegations that its pharmacies in the Virgin Islands charged the Medicaid program more than its “usual and customary charge” for certain drugs.
The accusations against Kmart date back to the mid-2000s when the company 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 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, Kmart did not. Rather, Kmart continued to charge federal health care programs what they had been charging before the program started even though that price was often higher than the new price being charged to cash customers.
On July 16, 2008, James Garbe a former Kmart pharmacist, originally filed suit against Kmart in the United States District Court for the Central District of California. The case was subsequently transferred to the Southern District of Illinois. 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 basis of the claim was that the federal government and virtually every state Medicaid program, including the Virgin Islands, require that a pharmacy charge no more than its “usual and customary” rate for goods and services. Therefore, when Kmart billed and received $5 for a prescription that a cash-paying customer could purchase for $4, the lawsuit claimed that the claim was falsely representing the “usual and customary rate.” The parties, working with several states’ Medicaid Fraud Units, entered into a settlement agreement that resolved these allegations for the time of Sept. 1, 2004, through Dec. 31, 2014. The Virgin Islands Medicaid Fraud Control Unit is 100 percent funded by a grant from the United States Department of Health and Human Services – Office of the Inspector General.
The agreement was part of a $59 million settlement that includes a resolution of state Medical and insurance claims against Kmart.
FOR IMMEDIATE RELEASE
May 13, 2024
Sandra Goomansingh
Media Relations Director
(340) 774-5666 ext. 10105
Email: sandra.goomansingh@doj.vi.gov