Kmart pays $1.4 million to settle U.S. charges over Medicare inducements

A woman shops for toys in a Kmart store in New York City, December 6, 2010. REUTERS/Mike Segar

WASHINGTON/NEW YORK (Reuters) - Kmart Corp has paid $1.4 million to settle U.S. allegations that it violated the federal False Claims Act by inducing Medicare beneficiaries to fill prescriptions at its pharmacies, the Department of Justice said on Tuesday.

The government said the accord resolves allegations that Kmart, a unit of Sears Holdings Corp SHLD.O, let beneficiaries use drug manufacturers' coupons to reduce or eliminate prescription co-payments.

It said this caused people to seek out brand-name drugs rather than cheaper generics, boosting the government’s costs.

Kmart was also accused of improperly offering discounts on gasoline purchases at participating gas stations based on the number of prescriptions filled.

The government said Kmart’s improper activity lasted from June 2011 to June 2014, and violated a federal prohibition against offering benefits to Medicare beneficiaries to influence their decisions about which pharmacies to use.

Tuesday’s settlement resolved claims first brought in a 2013 whistleblower lawsuit by Joshua Leighr, a former Kmart pharmacist from Kansas City, Missouri. He will receive about $248,500 of the payout, the Justice Department said.

Kmart has about 780 in-store pharmacies, and settled without any determination of liability, the Justice Department said

Howard Riefs, a Sears spokesman, declined to comment. The company is based in Hoffman Estates, Illinois.

The case is U.S. ex rel. Leight v. Sears Holdings Corp et al, U.S. District Court, Western District of Missouri, No. 13-00988.

Reporting by Lisa Lambert, editing by Sandra Maler and David Gregorio