Kmart Resolves False Claims Act Allegations for Overbilling

jonathan-perez-409943-copy-300x200Kmart Corporation, a subsidiary of Sears Holding Corporation, will pay the federal government $32.3 million to settle allegations of violations of the False Claims Act. A whistleblower alleged that Kmart stores did not report discounted prescription drug prices to Medicare Part D, Medicaid, and TRICARE, thereby receiving larger reimbursements than it was entitled to.

Kmart Wrongdoing Exposed by Whistleblower

In 2008, pharmacist James Garbe filed a qui tam suit under the FCA against Kmart. He alleged that Kmart pharmacies offered discounted generic drug prices to customers who paid cash through various programs, yet knowingly failed to disclose those prices to federal health programs. Instead, between 2004 and 2016, it reported to Medicare, Medicaid, and TRICARE its customary prices for drugs, which were then used to establish reimbursement rates. The incorrect claims lead to Kmart receiving higher reimbursements than the business was entitled to.

Government Declined to Intervene

Qui tam suits are filed by private individuals on behalf of the government. Once the lawsuit is filed, the government is notified and given a period of time to investigate the claims. During this time, the qui tam suit is under seal and no one else knows about it. Then, the government has the choice to intervene or not in the suit. If the government joins the suit, it becomes a party. If it does not, the whistleblower has the option to move forward with the lawsuit or not. In this case, the government declined to intervene with the action, but Garbe moved forward.

A Nearly Decade-Long Battle

The qui tam suit against Kmart was unsealed about seven years ago, many years after it was originally filed. Kmart fiercely defended itself and stated that it reported the pharmacies’ accurate usual and customary prices to the health care programs. The court did not agree and states Kmart’s discount programs needed to be taken into account.

Kmart attempted to appeal up to the U.S. Supreme Court, however the court declined to hear the case. Instead, the U.S. Seventh Circuit Court of Appeals decision from 201 ruling against Kmart remains in place.

The Final Settlement

Ultimately, the suit led to a $59 million settlement between the U.S., various state Medicare programs, and Kmart. Of the settlement, $32.3 million will be paid to the federal government. Garbe is set to receive 29% of the federal government’s recovery for a total of $9.3 million. He will also be awarded portions of the state’s recoveries.

Do You Have Information About Health Care Fraud?

If you work for a business within the medical industry and you are aware of false billing to state or federal health care programs, such as Medicare, Medicaid, or TRICARE, then you need to speak with a San Francisco qui tam lawyer right away. If you have evidence of fraudulent billing that violates the False Claims Act, or evidence of another type of health care fraud, then you may be able to blow the whistle and file a lawsuit on behalf of the government.

Qui tam suits can be difficult and lengthy processes. However, as you can see in Garbe’s case, whistleblowers can be well compensated when they help the government recover illegally obtained funds.

For more information on qui tam suits, call Brod Law Firm at (800) 427-7020 to schedule a free consultation.  

(image courtesy of Jonathan Perez)