Kmart Corporation will pay the United States $32.3 million to settle False Claims Act allegations brought by a whistleblower who alleged the retailer failed to report discounted prescription drug prices to government health care programs, resulting in the U.S. paying more for drugs than it should have.
The U.S. Department of Justice said that James Garbe, a pharmacist at a Kmart store in Ohio, sued Kmart in 2008 under the whistleblower provisions of the False Claims Act, which allow private parties to sue on behalf of the U.S. government in cases of suspected fraud.
The whistleblower lawsuit alleged that Kmart pharmacies offered discounted generic drug prices to cash-paying customers through various club programs but knowingly failed to disclose those prices to the federal government as required by law.
The Centers for Medicare & Medicaid Services (CMS) and U.S. Dept. of Defense Military Health System take into consideration the discounts drugstores and other retailers provide to other customers when determining their reimbursement rates.
Mr. Garbe’s whistleblower lawsuit alleged that Kmart did not disclose the discounts it offered to customers to customers who paid cash to Medicare Part D, Medicaid, and TRICARE, the health care program for service members and their families.
The settlement agreement with the U.S is a part of a global $59 million settlement that includes a resolution of state Medicaid and insurance claims against Kmart, the Justice Dept. said.
Mr. Garbe chose to continue litigating the case after the U.S. government declined to intervene in the case. He will receive $9.3 million as a whistleblower award for helping the U.S. recover the health care funds.
“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.”