Food City to pay $8.4M to settle opioids-related allegations

Abingdon-based K-VA-T Food Stores, operator of the Food City supermarket chain, has agreed to pay more than $8.4 million to the federal government to settle allegations under the False Claims Act (FCA) related to dispensing opioids and other controlled substances.

The U.S. Department of Justice announced the agreement with K-VA-T Food Stores Monday,

In a statement, K-VA-T Food Stores noted that “the allegations focused primarily on circumstances from more than a decade ago. K-VA-T has continually disputed the validity of these allegations, and the settlement agreement clearly states there is no admission of liability by K-VA-T. This case is another example of the many cases nationwide brought against manufacturers, distributors and retailers of opioid products.”

In October 2020, the entity K-VA-T Litigation Partnership filed a FCA qui tam action, which allows individuals or entities to sue wrongdoers over fraud against federal programs, in the U.S. District Court for the Eastern District of Tennessee, alleging Food City dispensed controlled substances in Georgia, Kentucky, Tennessee and Virginia that were medically unnecessary.

From January 2011 to December 2018, 24 Food City pharmacies, the government alleged, dispensed opioids and other controlled substances that were medically unnecessary, lacked a legitimate medical purpose and/or were not dispensed “pursuant to valid prescriptions.” Food City also, the government stated, submitted claims for payment for these drugs to federal health care programs like Medicare.

Baron & Budd, a Texas-based law firm, issued a press release Monday stating the whistleblower in the case is a former Food City pharmacy employee who regularly reported his concerns to management.

The initial 2020 lawsuit notes that Food City No. 821 in Bristol, Virginia, at one time received enough opioids for 25 pills per year for each of the 13,231 men, women and children who lived within five miles of the pharmacy.

“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 Francis M. Hamilton III, U.S. attorney for the Eastern District of Tennessee, in a news release.

Of the $8.48 million owed to the government, more than $4.2 million is restitution. K-VA-T Litigation Partnership will receive more than $1.5 million. Food City will also pay an additional $78,621 to the states of Virginia and Kentucky for claims paid to Food City by state Medicaid programs.

The resolution was coordinated by 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 the Department of Health and Human Services Office of Inspector General and the Defense Criminal Investigative Service.

In July, the Justice Department announced a $409 million settlement with Rite Aid to settle the government’s allegations under the FCA and Controlled Substances Act for dispensing “at least hundreds of thousands” of unlawful prescriptions for controlled substances.

K-VA-T Food Stores operates 158 retail outlets throughout Southeast Kentucky, Southwest Virginia, East Tennessee, North Georgia and Alabama.