Kmart pays $32.3 million to resolve False Claims Act allegations for overbilling

US pharmacy firm Kmart Corp, a wholly-owned subsidiary of Sears Holdings, 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 generic prescription drug prices to Medicare Part D, Medicaid, and TRICARE, the health program for uniformed service members and their families, says the Justice Department.

The agreement resolves allegations arising from a lawsuit brought under the qui tam, or whistleblower, provisions of the False Claims Act, which permit private citizens with knowledge of fraud against the government to bring an action on behalf of the USA and to share in any recovery.

The 2008 lawsuit, which was filed by James Garbe in the federal district in Los Angeles and later transferred to the Southern District of Illinois, 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.