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CA Department of Insurance

National retailer settles civil suit alleging prescription fraud practices

News: 2018 Press Release

For Release: January 4, 2018
Media Calls Only: 916-492-3566
Email Inquiries: cdipress@insurance.ca.gov
National retailer settles civil suit alleging prescription fraud practices
Insurance Commissioner joins whistleblower in alleging Kmart pharmacies defrauded health insurers out of millions
SACRAMENTO, Calif.Insurance Commissioner Dave Jones announced a $1 million settlement with Kmart Corporation, one of the nation's largest big-box retailers with 270 stores nationwide, for alleged insurance fraud in California through prescription over-billing practices at Kmart pharmacies.

The California settlement is part of a multi-million dollar national settlement in a civil suit in which the Department of Insurance participated alleging public and commercial insurance fraud through prescription over-billing practices.

"When it's all said and done, illegal billing practices by pharmacies are expensive propositions for consumers, as insurers pass along the cost of fraud to consumers through higher premiums," said Insurance Commissioner Dave Jones. "The large dollar amounts associated with medical provider fraud has led me to focus the department's law enforcement efforts on investigating both civil and criminal medical provider fraud cases.

The settlement stems from a qui tam action filed by whistleblower James Garbe, a former Kmart pharmacist, who alleged the retailer overbilled private health insurers and government health programs, including Medicare, Medicaid, TRICARE, for prescriptions filled in Kmart pharmacies from September 1, 2004 through
December 31, 2016.

Instead of setting a price for certain medications, some insurance contracts specify insurers will reimburse at a rate based on what the pharmacy charges cash-paying customers. The whistleblower contended Kmart submitted false claims for payments Kmart knew exceeded the agreed-upon rates.

The insurance commissioner represents the people of California in civil cases alleging insurance fraud against private insurers under California Insurance Code False Claims Act, which resulted in the $1 million settlement for California.

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Media Notes:

Garbe v. Kmart – California Settlement Agreement

Other examples of CDI qui tam cases: 


The California Department of Insurance, established in 1868, is the largest consumer protection agency in California. Insurers collect $289 billion in premiums annually in California. Since 2011 the California Department of Insurance received more than 1,000,000 calls from consumers and helped recover over $394 million in claims and premiums. Please visit the Department of Insurance web site at www.insurance.ca.gov. Non-media inquiries should be directed to the Consumer Hotline at 800.927.HELP or 213.897.8921. Telecommunications Devices for the Deaf (TDD), please dial 800.482.4833.

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