Kmart to Settle FCA Violation Allegations for $32.2 Million

Kmart agreed to pay a $32.3 million settlement over charges that its in-store pharmacies failed to report discounted drug prices to federal programs and, therefore, were reimbursed at inflated prices.

A 2008 whistleblower lawsuit filed under the False Claims Act alleged Kmart pharmacies offered customers prescription drugs at discounted generic prices through numerous programs but did not disclose the discounts to Medicare, Medicaid and TRICARE when reporting prices. As a result, the programs reimbursed the pharmacies based on higher prices than were actually paid, according to the complaint.

The settlement is part of a larger $59 million agreement to resolve state Medicaid and insurance claims against Kmart. James Garbe, who filed the initial complaint, will receive $9.3 million. Garbe filed the lawsuit in the federal district in Los Angeles, but it was later transferred to the Southern District of Illinois.