United States Attorney
Southern District of New York

PREET BHARARA, the United States Attorney for the
Southern District of New York, ERIC SCHNEIDERMAN, the Attorney
General of the State of New York, and THOMAS ODONNELL, the
Special Agent-in-Charge of the New York Office of Investigations
for the Office of Inspector General, U.S. Department of Health
and Human Services, announced today a settlement between the
United States and DUANE READE, INC. (“DUANE READE”), resolving an
anti-kickback lawsuit alleging that Duane Reade submitted false
claims to the New York Medicaid program. The settlement,
approved in Manhattan federal court by U.S. District Judge
Richard Sullivan, requires DUANE READE to pay to the United
States and the State of New York a total of $369,744 in civil
damages under the False Claims Act.
Manhattan U.S. Attorney PREET BHARARA stated:
“Healthcare fraud drains the system of billions of dollars of
hard-earned taxpayer money. The U.S. Attorney’s Office in the
Southern District of New York will continue to work with our
state and federal law enforcement partners to aggressively
enforce the laws prohibiting healthcare fraud.”
New York State Attorney General ERIC SCHNEIDERMAN
stated: “Cracking down on those who try to defraud the taxpayers
is a top priority for this office. We will continue to work with
our colleagues in law enforcement to send a clear message that we
will leave no stone unturned in the fight against fraud, waste,
and corruption in New York State.”
HHS-OIG Special Agent-in-Charge THOMAS ODONNELL stated:
“HHS-OIG is committed to holding providers accountable for
defrauding Medicaid. We will continue to aggressively pursue
those who take advantage of all Federal health care programs.”
According to the documents filed in Manhattan federal
DUANE READE, a provider of prescription drug services
to Medicaid patients in New York, operated the Duane Reade
Express Pharmacy Kiosk Program from 2003 through 2008 (the “Kiosk
Program”). The Kiosk Program involved the installation of
automated kiosks in physicians’ offices to allow and encourage
patients to fill their prescriptions at DUANE READE by entering
the prescription information electronically at their doctors’
offices. After entering prescription information into the
kiosks, patients could pick up their prescribed medications at a
local Duane Reade store.
As part of the Kiosk Program, DUANE READE made
purported monthly “rent” payments to physicians for the amount of
space occupied by the kiosks placed in their offices. DUANE
READE did not consider the fair market value of the physical
space occupied by the kiosks, and in violation of the federal and
state Anti-Kickback statutes, paid higher “rents” to physicians
who generated a high volume of prescriptions. As a result of
Duane Reade’s unlawful financial relationship with physicians who
participated in the Kiosk Program, DUANE READE submitted false
claims to Medicaid for payment for prescription drug services.
DUANE READE has agreed to pay $369,744 to resolve these claims.
* * *
The allegations of fraud were first brought to the
attention of the Government by a whistle-blower, who filed a
lawsuit under the qui tam provisions of the False Claims Act.
The False Claims Act permits the United States to intervene in
cases originally commenced by private parties who have knowledge
of fraud committed against the Government.
Mr. BHARARA praised the New York State Office of the
Attorney General and the Office of Inspector General, U.S.
Department of Health and Human Services for their work on this
This case is being handled by the Southern District of
New York’s Civil Frauds Unit, working together with the Medicaid
Fraud Control Unit of the New York State Office of the Attorney
General. Assistant United States Attorneys LARA K. ESHKENAZI AND
TARA La MORTE are in charge of the case.
11-112 ###

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