Food City Agrees To Pay Over $8 Million To Settle False Claims Act Allegations Related To Opioid Dispensing

KNOXVILLE, Tenn.– K-VA-T Food Stores, Inc. doing business as Food City (Food City), a regional grocery store chain headquartered in Abingdon, Virginia, has agreed to settle the government’s allegations under the False Claims Act (FCA) related to its dispensing of opioids and other controlled substances.  Under the settlement, Food City will pay the United States $8,488,378.  Food City will pay an additional $78,621 to the states of Virginia and Kentucky for claims paid to Food City by state Medicaid programs.

According to court filed documents, the United States alleged that, from Jan. 1, 2011, through Dec. 31, 2018, 24 Food City store pharmacies dispensed opioids and other controlled substances that were medically unnecessary, lacked a legitimate medical purpose or medically accepted indication, and/or were not dispensed pursuant to valid prescriptions.  The United States alleges that, as a result, Food City knowingly submitted, or caused to be submitted, false claims to federal healthcare programs.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by K-VA-T Partnership, LLP.  Under those provisions, a private party can file an action on behalf of the United States and receive a portion of any recovery.  The qui tam case is captioned U.S. ex rel. K-VA-T Litigation Partnership, LLP v. K-VA-T Food Stores, Inc. d/b/a Food City, Case No. 3:20-cv-436 (EDTN).  Relator K-VA-T Litigation Partnership, LLP will receive $1,527,908 of the proceeds from the settlement.

“Pharmacies that fill prescriptions for opioids and other controlled substances have an obligation to ensure that those prescriptions are medically necessary,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department is committed to holding accountable pharmacies that have abdicated this responsibility and thereby contributed to the nation’s opioids crisis.”

“When pharmacies fill prescriptions for opioids and other powerful controlled substances without regard to their legitimacy or medical necessity it significantly contributes to the opioid epidemic, causing great harm to our citizens and communities,” said U.S. Attorney Francis M. Hamilton III for the Eastern District of Tennessee.  “This settlement agreement demonstrates that the United States Attorney’s Office and federal, state, and local law enforcement partners, are using all tools available to address the opioid crisis.”

“The Medicare and Medicaid programs deliver vital prescription drug services to beneficiaries,” said Special Agent in Charge Kelly J. Blackmon of the Department of Health and Human Services Office of Inspector General (HHS-OIG).  “This case underscores HHS-OIG’s dedication to addressing the nation’s opioid overdose crisis and ensuring that only legitimate, medically necessary prescriptions are dispensed.”

“The opioid epidemic continues to significantly impact the nation, devastating families across our country,” said Special Agent in Charge Derek M. Holt of the Office of Personnel Management Office of the Inspector General.  “We applaud our law enforcement partners and colleagues at the Department of Justice for their work to hold pharmacies accountable for actions that could exacerbate the epidemic and endanger the health and safety of patients served by Federal health care programs.”

“Today’s settlement demonstrates our commitment to holding pharmacies that knowingly dispense medically unnecessary opioids and other controlled substances accountable for their actions,” stated Special Agent in Charge Darrin K. Jones of the Department of Defense Office of Inspector General, Defense Criminal Investigative Service (DCIS), Southeast Field Office.  “DCIS thanks the U.S. Attorney’s Office and our investigative partners for their steadfast dedication to fighting the opioid epidemic plaguing our country and helping us protect servicemembers and their families.”

“TRICARE is committed to providing safe, effective, and appropriate care to our warfighters, retirees, veterans, and their families. Dispensing medically unnecessary opioids and other controlled substances to our beneficiaries puts them at great risk and will not be tolerated,” said Chief Edward C. Norton Jr. of the Pharmacy Operations Division for the Defense Health Agency.  “We will continue to hold pharmacies accountable for abiding by these standards to ensure we are delivering the very best health benefit to those who serve or have served our nation.”

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for Eastern District of Tennessee, with assistance from HHS-OIG and DCIS.

The investigation and resolution of this matter illustrates the government’s emphasis on combating health care fraud. One of the most powerful tools in this effort is the False Claims Act. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement can be reported to HHS at 800-HHS-TIPS (800-447-8477).

The matter was handled by Assistant U.S. Attorneys Alan G. McGonigal, Alexa Ortiz Hadley, and Jeremy S. Dykes for the Eastern District of Tennessee, and Civil Division Fraud Section Trial Attorney Elizabeth J. Kappakas.

The claims resolved by the settlement are allegations only and there has been no determination of liability. 

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