Kmart to pay $32.3M to settle prescription case

By Allen Cone  |  Dec. 23, 2017 at 2:30 PM
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Dec. 23 (UPI) -- Kmart Corp. will pay $35.3 million to the U.S. government and two states to settle allegations that its pharmacies failed to report discounted prescription drug prices to federal healthcare programs, the Justice Department announced.

The discount chain, owned by Sears Holding Corp., did not report information from Medicare Part D, Medicaid and Tricare for members of the military and their families, the Justice Department said in a release Friday after a case was settled in the U.S. District Court for the Southern District of Illinois.

The settlement includes $32.3 million to the U.S. government and $3 million to California and Illinois.

"Pharmacies that are not fully transparent about drug pricing can cause federal health programs to overpay for prescription drugs," Chad Readler, acting assistant attorney general of the department's Civil Division, said in a statement. "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 case stems from the whistle-blower provision in the False Claims Act, which permits private citizens with knowledge of fraud against the government to sue on behalf of the United States and to share in any recovery.

The whistle-blower's attorneys with Phillips & Cohen and Korein Tillery litigated the case for James Garbe, a Kmart pharmacist in Ohio.

Because the case was litigated without assistance from the U.S. government, Garbe will receive a whistle-blower award of $9.3 million from the U.S. proceeds. He alleged that Kmart sold a 30-day supply of a generic prescription drug for $5 to customers in its discount program, but then filed for reimbursement from the government for $152 for that same drug for its Medicare customers.

"This was a hard-fought victory for our client and for taxpayers," said Larry Zoglin, an attorney at Phillips & Cohen. "It is wrong for a pharmacy to charge government healthcare programs more than it charges cash-paying customers for the same prescription."

In January, the Supreme Court declined to hear Kmart's appeal of a U.S. 7th Circuit Court of Appeals decision in 2015 that declined to dismiss the case.

"Pharmacies and other providers who receive funds from taxpayers have a duty to follow the law," said U.S. Attorney Donald S. Boyce for the Southern District of Illinois. "If healthcare providers do not provide fair and transparent pricing as required under the law, the False Claims Act allows the government and whistle-blowers to ensure that the Medicare, Medicaid and Tricare programs are made whole."

An earlier version of this story incorrectly reported that James Garbe had died.

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