Frankfort, Ky. (WHAS11) - Attorney General Andy Beshear announced that the Kmart Corporation will pay more than $415,000 to Kentucky to resolve state and federal Medicaid program over-billing allegations.

Beshear joins with other states and the federal government to settle allegations regarding the company’s Retail Maintenance Program that offered discounts on generic drugs to its cash paying customers.

In the mid-2000s, Kmart and many other pharmacies began offering discounted generic drugs to their cash paying customers, typically $4 for a 30-day supply.

Although some pharmacies with similar programs gave federal health care programs the benefits of these prices, a lawsuit filed in the United States District Court for the Southern District of Illinois alleged Kmart, owned by Sears Holdings Management Corporation, was submitting false claims when it charged federal health care programs higher prices than it was charging cash paying customers.

The federal government and virtually every state Medicaid program require that a provider charge no more than its “usual and customary” rate for a good or service.

Kentucky’s Medicaid program will be reimbursed more than $100,000 and the remainder of the payout will cover Kentucky’s Medicaid obligations to the federal government, roughly $315,000.