On Dec. 22, 2017, it was announced that whistleblower litigation first filed nearly 10 years ago has finally settled between Kmart Corp., the federal government and several states.The case, US et al. vs. Kmart Corporation, Civil Action No. 12-cv-881-NJR-RJD (SD IL), was jointly litigated by Phillips & Cohen LLP and Korein Tillery that alleged Kmart overcharged government healthcare programs and private insurers for generic prescription drugs.

Kmart will pay $35.3 million for allegedly inflating prescription drug prices. The qui tam 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 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, in a statement. “Not only did we recover funds for taxpayers, we also stopped a practice that would have been an improper drain on government healthcare funds.”  

The plaintiff was also represented by Larry Zoglin, a whistleblower attorney who is Of Counsel to Phillips & Cohen.