Court Green Lights Kmart Generic Drug Pricing Case

On September 22, 2007, former Kmart pharmacist James Garbe filled a 90-day prescription for a generic drug at Kmart under the “Retail Maintenance Program,” which allowed cash-paying customers to purchase 90-day prescriptions of more than 300 widely-prescribed generic drugs for $15 (or less). Relator expected that, after his $10 co-payment, Kmart would claim a $15 charge (the same amount paid by the cash-paying public) to his Medicare Part D plan and seek reimbursement from that plan for the remaining $5. However, instead of seeking $5, Kmart allegedly sought more than $50 from his plan.

As a former Kmart pharmacist, Dr. Garbe determined that this was not an isolated incident, but was likely a corporate billing problem that was potentially costing the government millions of dollars. Dr. Garbe decided to file a False Claims Act qui tam action against his former employer, accusing the retail store of overcharging Medicaid and other federal programs for generic medications.


A few days ago, an Illinois federal judge denied Kmart Corporation’s motion to dismiss. In denying Kmart’s motion, the court ruled that Dr. Garbe sufficiently alleged a False Claims Act action, by alleging that Kmart presented a false claim for generic prescription drug reimbursement to the government, in which the government paid Kmart for such a claim, or in which Kmart used a false claim to conceal amounts it owed to the government.

More information about Medicare fraud is located at the Nolan Auerbach & White website.