The United States will reportedly receive $32.3 million from Kmart Corporation, a wholly owned subsidiary of Sears Holdings Corporation (SHC), resolving allegations of drug overbilling.

According to a press release by the United States Department of Justice (DOJ), in-store pharmacies at Kmart stores allegedly failed to report discounted prescription drug prices to federal health programs such as Medicaid, Medicare Part D, and Tricare, a managed service healthcare program for service members.

The drug overbilling lawsuit was first filed under the qui tam provisions of the False Claims Act in 2008. Under the False Claims Act, a private citizen with knowledge of fraud, such as drug overbilling, may file a lawsuit on behalf of the United States. If the claim is successful, the private citizen is allotted a share in any recovery.

According to the DOJ, Kmart pharmacies failed to report discounted generic drug prices provided to cash-paying customers to federal health programs. Reimbursement rates are typically established by federal health programs through usual and customary prices.

The drug overbilling lawsuit was filed in the federal district of Los Angeles by plaintiff James G. and later transferred to the Southern District of Illinois.

According to Acting U.S. Assistant Attorney General for the Department’s Civil Division, “Pharmacies that are not fully transparent about drug pricing can cause federal health programs to overpay for prescription drugs.”

Furthermore, “[t]his 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,” the Acting U.S. Assistant Attorney General for the Department’s Civil Division added.

The U.S. Attorney for the Southern District of Illinois commented that “[p]harmacies and other providers who receive funds from taxpayers have a duty to follow the law.”

“If healthcare 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,” he added.

The DOJ said the $32.3 million settlement agreement is part of a $59 million settlement that includes a resolution of state Medicaid and insurance claims against Kmart. For serving as the whistleblower, James will receive a $9.3 million of the recovered funds.

What Is a Qui Tam Lawsuit?

A type of whistleblower lawsuit, termed a qui tam lawsuit, is brought under the False Claims Act. The Latin phrase roughly translates to “he who brings an action for the king as well as for himself.” The lawsuit rewards whistleblowers for successful claims where the United States recovers funds lost to fraud.

Qui tam lawsuits provide the United States powerful ways to stop many kinds of fraud including Medicare and Medicaid fraud, the recovery of billions stolen from the U.S. Treasury and taxpayers, and defense contractor fraud.

By rewarding whistleblowers through the False Claims Act, the government helps protect whistleblowers because of the risks they take to stop fraudulent acts committed against the government.