WASHINGTON, Dec. 22, 2017 /PRNewswire/ -- Kmart Corp.
has agreed to pay $35.3 million to
the federal government and a number of states to settle a
whistleblower lawsuit jointly litigated by Phillips & Cohen LLP
and Korein Tillery that alleged
Kmart overcharged government healthcare programs and private
insurers for generic prescription drugs.
The "qui tam" (whistleblower) case – filed in 2008 by Phillips
& Cohen on behalf of former Kmart pharmacist James Garbe – alleged that from 2004 to 2016
Kmart charged Medicare, Medicaid and Tricare as well as private
insurers more for generic prescription drugs than it charged
customers who paid cash. Pharmacies are required to bill government
insurance programs the lowest price offered to cash-paying
customers.
The $35.3 million settlement
includes $3 million paid to
California and Illinois to settle Garbe's allegations that
Kmart also improperly billed private insurers higher prices for
generic prescription drugs in violation of the
California Insurance Fraud Prevention Act and the Illinois
Insurance Claims Fraud Prevention Act.
This case stands out because the whistleblower's attorneys,
Phillips & Cohen joined by co-counsel Korein Tillery, litigated the case against Kmart
on their own without government assistance. Because of this, Garbe
will receive a whistleblower award of 29 percent of the federal
government's recovery ($9.3 million),
which is nearly the maximum percentage whistleblowers can be
awarded under the False Claims Act.
The False Claims Act requires the government to decide whether
it will join a qui tam case, which depends on many factors. When
the government does not intervene, the law allows whistleblowers to
litigate qui tam lawsuits on their own to recover funds for the
government.
"The settlement shows we were right to continue to pursue the
case on behalf of taxpayers, despite the government's decision not
to join the qui tam lawsuit," said Erika A.
Kelton, a whistleblower attorney and partner at Phillips
& Cohen. "Not only did we recover funds for taxpayers, we also
stopped a practice that would have been an improper drain on
government healthcare funds."
Kmart waged a fierce legal battle to get the qui tam case
dismissed after it was unsealed seven years ago, taking the
litigation all the way to the US Supreme Court.
The Supreme Court declined in January to hear Kmart's appeal of
a US Seventh Circuit Court of Appeals decision in 2015 that ruled
against Kmart and denied the company's request to dismiss the
case.
"This was a hard-fought victory for our client and for
taxpayers," said Larry Zoglin, a
whistleblower attorney who is Of Counsel to Phillips & Cohen.
"It is wrong for a pharmacy to charge government healthcare
programs more than it charges cash-paying customers for the same
prescription."
For instance, according to the whistleblower's complaint, Kmart
sold a 30-day supply of a generic version of a popular prescription
drug for $5 to customers who
registered for a discount program but Kmart sought reimbursement
from the government for $152 for the
same drug for Medicare customers, which Kmart claimed was the
"usual and customary" price.
Kmart argued in court that it could exclude the lower prices
that it charged members of its discount program when determining
the proper price – known as the "usual and customary price" – to
charge government healthcare programs. But the appeals court
shredded that argument.
"The 'usual and customary' price requirement should not be
frustrated by so flimsy a device as Kmart's 'discount programs,'"
the court wrote in its opinion.
Qui tam case citation: US et al. vs. Kmart Corporation,
Civil Action No. 12-cv-881-NJR-RJD (SD IL).
About Phillips & Cohen LLP
Phillips & Cohen is
the nation's most successful law firm representing whistleblowers,
with recoveries for governments totaling more than $12.3 billion in civil settlements and criminal
fines. The firm represents whistleblowers in qui tam lawsuits as
well as cases brought under the whistleblower reward programs of
the SEC, CFTC and IRS. www.phillipsandcohen.com
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SOURCE Phillips & Cohen LLP