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Kmart to pay $32.3M to settle drug overbilling suit

Department store operator Sears Holdings Corp.'s Kmart Corp. agreed to pay $32.3 million to settle a lawsuit that alleged that the discount retailer overbilled federal health programs for generic prescription drugs, the U.S. Department of Justice said Dec. 22.

The whistleblower lawsuit was filed by James Garbe in 2008 under the False Claims Act after the government declined to intervene in the issue. The suit alleged that Kmart pharmacies offered discounts on generic prescription drugs to customers paying cash through the company's club programs, then concealed the discounts when reporting prices to federal health programs. The federal health programs use this reported price to establish reimbursement rates.

The agreement is part of a global $59 million settlement, which includes resolution of state Medicaid and insurance claims against Kmart. Garbe will receive $9.3 million.

The case was handled by the Justice Department's Civil Division and the U.S. Attorney's Offices for the Southern District of Illinois and Central District of California and the National Association of Medicaid Fraud Control Units.