Kmart Corporation to Pay U.S. $32.3 Million to Resolve False Claims Act Allegations for Overbilling Federal Health Programs for Generic Prescription Drugs

prescription drugKmart Corporation, a wholly owned subsidiary of Sears Holdings Corporation (SHC), has agreed to pay $32.3 million to the United States to settle allegations that in-store pharmacies in Kmart stores failed to report discounted prescription drug prices to Medicare Part D, Medicaid, and TRICARE.

The False Claims Act lawsuit, which was filed in 2008 by James Garbe, alleged that Kmart pharmacies offered discounted generic drug prices to cash-paying customers through various club programs but knowingly failed to disclose those prices when reporting to federal health programs its usual and customary prices, which are typically used by those programs to establish reimbursement rates.

“Pharmacies that are not fully transparent about drug pricing can cause federal health programs to overpay for prescription drugs.” said Acting Assistant Attorney General Chad A. Readler for the Department’s Civil Division. “This settlement should put pharmacies on notice that there will be consequences if they attempt to improperly increase payments from taxpayer-funded health programs by masking the true prices that they charge the general public for the same drugs.”

The settlement agreement with the United States is a part of a global $59 million settlement that includes a resolution of state Medicaid and insurance claims against Kmart. Garbe, who litigated the case after the government declined to intervene in the action, will receive $9.3 million.

The government’s 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.

Jeffrey Newman represents whistleblowers: 1-800-682-7157