WASHINGTON — Kmart Corp. has agreed to pay $32.3 million to settle allegations its pharmacies caused federal health programs to overpay for prescription drugs by not telling the government about discounted prices.

The U.S. Department of Justice announced the settlement agreement Friday.

Kmart is part of Sears Holdings Corp., based in Hoffman Estates, Illinois. It was sued in 2008 by former Kmart pharmacist James Garbe, who worked in Defiance, Ohio.

The whistleblower lawsuit alleged Kmart offered discounted prices to customers who paid in cash through club programs but didn't report those discounts to federal health programs such as Medicare Part D and Medicaid.

The Department of Justice says the agreement is a part of a $59 million settlement that includes a resolution of state Medicaid and insurance claims against Kmart. Garbe litigated the case and will receive $9.3 million.

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