Kmart Corporation, a wholly owned subsidiary of Sears Holdings Corporation, has entered into an agreement with the United States Government to settle a whistleblower lawsuit by paying the government $32 million. The claims are that Kmart stores with in-store pharmacies failed to report discounted prescription drug prices to Medicare Part D, Medicaid and TRICARE, the health program for members of the U.S. uniformed services and their family members.
The claims were brought under the qui tam provisions of the False Claims Act (FCA). For those who may not know, the qui tam provisions of the Act allows private citizens with knowledge of fraud committed against the government to “blow the whistle” on the parties committing the fraud and bring a civil action on behalf of the U.S. government. The person bringing the suit is known as the “relator” and is permitted to share in any recovery obtained on behalf of the government.
In the Kmart case, the lawsuit was filed in 2008 by a qui tam relator named James Garbe. Originally, the lawsuit was filed in federal court in Los Angeles, California, but was later transferred to the United States District Court for the Southern District of Illinois. In the qui tam lawsuit, Garbe 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 care programs its usual and customary prices, which are typically used by those programs to establish reimbursement rates.
The settlement agreement with the Untied States is part of a global $59 million settlement that includes a resolution of state Medicaid and insurance claims against Kmart. Garbe, the qui tam relator, litigated the case after the government declined to intervene in the lawsuit and he will receive $9.3 million. Donald S. Boyce, U.S. attorney for the Southern District of Illinois, stated:
Pharmacies and other providers who receive funds from taxpayers have a duty to follow the law. If health care providers do not provide fair and transparent pricing as required under the law, the False Claims Act allows the government and whistleblowers to ensure that the Medicare, Medicaid, and TRICARE programs are made whole.
Acting Assistant Attorney General Chad A. Readler, on behalf of the Department’s Civil Division, added this 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.
It’s quite apparent there is widespread cheating and outright fraud involved in many federal programs. This is especially true in programs such as Medicaid. This is why whistleblowers are so critically important today to protect taxpayers.
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