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National retailer settles civil suit alleging prescription fraud practices

News: 2018 Press Release

For Release: January 4, 2018
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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: 

Led by Insurance Commissioner Ricardo Lara, the California Department of Insurance is the consumer protection agency for the nation's largest insurance marketplace and safeguards all of the state’s consumers by fairly regulating the insurance industry. Under the Commissioner’s direction, the Department uses its authority to protect Californians from insurance rates that are excessive, inadequate, or unfairly discriminatory, oversee insurer solvency to pay claims, set standards for agents and broker licensing, perform market conduct reviews of insurance companies, resolve consumer complaints, and investigate and prosecute insurance fraud. Consumers are urged to call 1-800-927-4357 with any questions or contact us at via webform or online chat. Non-media inquiries should be directed to the Consumer Hotline at 800-927-4357. Teletypewriter (TTY), please dial 800-482-4833.

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