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Thursday, 28 December 2017 00:00

Kmart has agreed to pay over $32 million from a whistleblower lawsuit brought nearly a decade ago.

Written by Jonathan Druckman

In 2008, James Garbe, a pharmacist at an Ohio Kmart brought the lawsuit when he realized that his employer was charging Medicare customers more than customers enrolled in its discount program for generic drugs.

Under numerous acts including TRICARE, Medicaid, and Medicare Part D, pharmacies are required to bill at the lowest price that they offer products to paying customers at. According to the lawsuit, Kmart was engaged in a practice where it was selling a 30-day supply of a popular prescription drug for just $5 to any customer that was enrolled in their cash discount program. However, the same 30-day supply of that generic drug was being billed to the government at $152 for all Medicare customers.

Acting assistant attorney general for the Department of Justice’s Civil Division had this to offer in a news release, “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.”

A whistleblower lawsuit may also be known as a false claims act or qui tam lawsuit. Under the False Claims Act a whistleblower may receive a percentage of any money that the government is able to recover as a result of the qui tam lawsuit. The idea of a federal False Claims Act actually stems back to the Civil War profiteering. The reason behind this law is to encourage people at organizations to report fraud. Even if they leave the company, the lawsuit will generally result in a large payout. This act has been pivotal in detection and prosecution of fraud against the government.

Since 1987, the U.S. Department of Justice has recovered over $27.2 billion. Typical types of whistleblower cases include healthcare fraud, securities fraud, and tax fraud. Mr. Garbe is expected to receive $9.3 million under the federal government’s whistleblower recovery provisions.

By ending Kmart’s alleged deceptive practices more money will be left for the government healthcare funds. Hopefully, this signals to other pharmacies that drug pricing that causes the federal government to overpay for prescription drugs will be met with severe economic repercussions. Kmart is part of Sears Holding Corp., based in Illinois.

Some states have also enacted similar whistleblower laws.

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