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Massachusetts Lawsuit Against Long-Term Pharmacy Care Provider Fails to Clear the Legacy FCA Public Disclosure Bar

On April 30, 2018, the U.S. District Court for the District of Massachusetts dismissed the last remaining state False Claims Act (FCA) claims against long-term care pharmacy provider PharMerica, Inc. on the grounds that neither relator qualified as an “original source” under the applicable pre-2010 version of the FCA, thereby precluding their claims under the public disclosure bar. Critically, neither relator had firsthand, “direct” knowledge of the alleged fraud scheme. In 2007, two relators (employees of a pharmaceutical company) filed suit alleging that their employer had offered financial incentives to two long-term care pharmacy providers (LTCPs) in exchange for the pharmacy providers’ promotion of prescriptions of a specific antidepressant. Specifically, the relators alleged that their employer offered significant discounts and rebates to LTCP customers in exchange for increased promotion of the antidepressant, and that market-tier discounts were...

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Eleventh Circuit Says Whistleblower’s Suit Should Never Have Been Heard

On November 8, 2016, the US Court of Appeals for the Eleventh Circuit issued a decision in U.S. ex rel. Saldivar v. Fresenius Medical Care Holdings, Inc., remanding the case for entry of an order dismissing the case for lack of subject matter jurisdiction based on the False Claims Act’s (FCA) pre-2010 public disclosure bar. We previously posted about the US District Court for the Northern District of Georgia’s October 30, 2015, decision granting Fresenius’ motion for summary judgment. As a reminder, relator Chester Saldivar alleged that Fresenius violated the FCA by billing the government for the “overfill” in medication vials, which is the extra medication included to facilitate the extraction of the amount labeled on the vial. Fresenius maintained that the action should be dismissed for lack of subject matter jurisdiction due to the pre-2010 version of the public disclosure bar in the FCA, which prevents qui tam actions if the allegations in question were...

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District Court Opinion Analyzes the Impact of the 2010 FCA Amendments on the Public Disclosure Bar

On September 30, 2016, the US District Court for the Southern District of Indiana issued an opinion in United States ex rel. Conroy v. Select Medical Corp., et al. (Case No. 12-cv-000051) regarding the 2010 False Claims Act (FCA) Amendments to the public disclosure bar (31 U.S.C. § 3730(e)(4)(A)) and the government’s associated right to veto  a public disclosure-based dismissal. The opinion addresses a motion to dismiss a non-intervened FCA suit based on several grounds, including the public disclosure bar.  Complicating matters was that the allegations involved claims that arose both prior to and after March 23, 2010 - the effective date of the amendments to the public disclosure bar.  In addition, the government, despite not intervening with respect to the FCA claims, filed its own brief opposing a public disclosure bar-based dismissal.  The court’s opinion delves into three significant changes made to the public disclosure bar in 2010: (1) removal of...

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Ninth Circuit Rejects Qui Tam Relator’s Original Source Claim

On July 27, 2016, a three-judge panel of the Ninth Circuit Court of Appeals in California issued a ruling in United States ex rel. Hastings v. Wells Fargo Bank, NA, Inc., affirming the district court dismissal of a qui tam suit on the grounds that the relator was not an original source. The relator had sued Wells Fargo and a number of other lending institutions under the Federal Claims Act (FCA), claiming they had falsely certified to the federal Department of Housing and Urban Development (HUD) that they were in compliance with a regulation requiring borrowers to make a down payment of at least 3%. Federal regulations allow this down payment to be paid via gift, so long as repayment for the gift is not “expected or implied.” See U.S. ex rel. Hastings v. Wells Fargo Bank, Nat. Ass’n (Inc.), 2014 WL 3519129, at *1 (C.D. Cal. July 15, 2014) (summarizing HUD regulations). The defendants moved to dismiss, arguing that the gravamen of the allegations (that certain...

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First Circuit Rejects FCA Suit On Public Disclosure Grounds

On June 30, 2016, a three-judge panel of the First Circuit Court of Appeals in Boston issued a ruling in United States ex rel. Winkelman and Martinsen v. CVS Caremark Corp., affirming the district court dismissal of a qui tam suit (in which the United States had declined to intervene) on public disclosure grounds. The relators had sued CVS in August 2011 under the FCA and several analogous state statutes, claiming CVS’ “Health Savings Pass” program was designed to defraud Medicare and Medicaid by failing to pass along discounts offered to certain customers.  CVS moved to dismiss, arguing that significant publicity in 2010 (during which labor unions and state officials alleged the Health Savings Pass program overcharged the government) was sufficient to bar the suit. The FCA states, in relevant part, that qui tam actions cannot stand “if substantially the same allegations or transactions as alleged in the action . . . were publicly disclosed.”  31 U.S.C. §...

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FCA Claims Based on Average Wholesale Price (AWP) Theory Barred by Public Disclosure Bar

On January 20, 2016, the U.S. District Court for the Eastern District of Missouri dismissed a complaint based on allegations of Average Wholesale Price (AWP) fraud under the False Claims Act (FCA) against CSL Behring, LLC (Behring) and specialty pharmacies Accredo Health, Inc., (Accredo) and Coram LLC (Coram).  See United States ex rel. Lager v. CSL Behring, LLC, et al., No. 4:14-CV-841CEJ, 2016 WL 233245 (E.D. Missouri 2016).  The Court found that relator’s allegations were barred by the public disclosure bar and did not satisfy the “original source” exception. Relator, a former Behring employee, alleged that the company reported inflated AWPs for prescription drugs, Vivaglobin and Hizentra, causing government health programs to reimburse specialty pharmacies much more than they paid for the drugs ($133 v. $65 and $151 v. $70).    Vivaglobin and Hizentra are classified as “DME infusion drugs” because they are self-administered by patients through a pump,...

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Seventh Circuit Strictly Construes Original Source Requirement Against ‘Bounty-Hunting’ Relator

In a decision released yesterday in U.S. ex rel. Bogina v. Medline Industries, Inc., the U.S. Court of Appeals for the Seventh Circuit affirmed a district court’s dismissal of a relator’s False Claims Act (FCA) complaint, holding that the complaint’s allegations had been publicly disclosed in a prior, settled lawsuit and the relator was not an original source. The opinion, authored by Judge Richard Posner, described FCA relators as “bounty hunters” and observed that the FCA imposes obstacles on parasitic bounty-hunting relators who seek to “be handsomely compensated if the[ir] suit succeeds.” Among those obstacles is the FCA’s public disclosure bar, which Judge Posner’s opinion ensures has sharp teeth in the Seventh Circuit. First, the court held that the 2010 amendments to the original source exception the public disclosure bar, requiring a relator to “materially add” to publicly disclosed allegations in order to surmount the bar, could be applied...

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