DETROIT, June 9 -- Federal and state attorneys general Thursday said Arbor Drugs Inc. will pay the government $7 million to settle allegations that it falsified and inflated Medicaid reimbursement claims.
The FBI and the state Health Care Fraud Division uncovered the alleged fraud while investigating Arbor pharmacy records between 1989 and last April, according to a statement issued by Assistant U.S. Attorney Saul Green and state Attorney General Frank Kelley.
Green said Arbor, of Troy, Mich., was charged with intentionally inflating its drug acquisition costs an average 5.8 percent in claims submitted to the Medicaid program for reimbursement.
Arbor, the nation's 19th largest drug store chain, responded while also releasing a quarterly earnings report that showed a $1 million loss.
'The settlement was agreed to by the company without admitting to any fault in order to put the matter to rest,' said spokesman Frederick Marx.
As part of the settlement, Arbor agreed tp modify its drug acquisition cost formula for Medicaid claims.
The company, which has 153 stores in Michigan, said it would take one-time, pre-tax charge of $7 million in the third quarter of its current fiscal year. As a result the firm posted a loss of $1.6 million in the third quarter compared with earnings of $3.9 million, or 24 cents a share, in the same period last year.
'The company believes that the modification of its Medicaid reimbursement formula will not have a material adverse effect uponfuture results of operations,' the company said in its earnings report.
Marx said the company is 'putting it all behind us' and will proceed with plans to open 18 new stores this year and 20 in 1995, mostly in southeast Michigan. He said officials were considering opening stores in contiguous states.
