Kmart Settles Kickback Case for $32 Million

Kmart has agreed to pay $32.3 million to settle a False Claims Act case alleging it overcharged Medicare, Medicaid, and TRICARE by failing to give the government the “best price” as required by law. The whistleblower-initiated case was filed in 2008 by James Garbe, a pharmacist at a Kmart in Ohio who discovered that his employer was charging Medicare customers more for generics than it was charging customers enrolled in its cash discount program.

Medicare Part D, Medicaid, and TRICARE require pharmacies to bill the lowest price offered to other customers, but Kmart was selling a 30-day supply of a generic drug for $5 to customers who registered for their discount program, but billed the government $152 for the same medication.

Mr. Garbe’s estate (he died while the case was being pursued) will receive a 29% relator share, as the government failed to join this case, and Garbe’s attorneys litigated on their own after the Department of Justice declined to intervene.

“The settlement shows we were right to continue to pursue the case on behalf of taxpayers, despite the government’s decision not to join the qui tam lawsuit,” said attorney Erika A. Kelton, a partner at Phillips & Cohen. “Not only did we recover funds for taxpayers, we also stopped a practice that would have been an improper drain on government healthcare funds.”

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