Sturgeon v. Pharmerica Corp.

CourtUnited States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
Citation438 F.Supp.3d 246
Docket NumberCIVIL ACTION NO. 15-6829
Parties STURGEON, et al., Plaintiff, v. PHARMERICA CORP., Defendant.
Decision Date05 February 2020

438 F.Supp.3d 246

STURGEON, et al., Plaintiff,


United States District Court, E.D. Pennsylvania.

Filed February 5, 2020

438 F.Supp.3d 253

Catherine Pratsinakis, Jesse N. Silverman, Jessica L. Titler-Lingle, Joshua D. Wolson, Marie-Theres Difillippo, Mark A. Schiavo, Dilworth Paxson LLP, Philadelphia, PA, Teresa N. Cavenagh, Duane Morris LLP, Philadelphia, PA, Michael M. Mustokoff, Duane Morris LLP, Phila, PA, for Plaintiff.

Carolyn P. Short, Michael R. Manthei, William F. Pezzolo, Holland & Knight LLP, Philadelphia, PA, for Defendant.


Rufe, J.

Relators Lena Sturgeon, Anthony Ferrante, Anthony Sciole, and Nathan Niles bring this qui tam action against PharMerica Corporation alleging violations of the federal False Claims Act1 and the false claims statutes of twenty-six states.2 Relators allege that PharMerica, a long-term care pharmacy, submitted false claims for government reimbursement for prescriptions it illegally altered without physician consent. Relator Sturgeon also alleges that PharMerica retaliated against her after she attempted to bring to its attention alleged instances of fraudulent activity. The state and federal governments declined to intervene and PharMerica has moved to dismiss the Amended Complaint.


A. PharMerica Is a Long-Term Care Pharmacy

PharMerica is the second largest institutional pharmacy in the United States.4 It fills prescription orders only for nursing homes and other long-term care facilities and is not open to the general public.5

Nursing home physicians submit prescriptions to PharMerica electronically

438 F.Supp.3d 254

through a "widely-used nursing home platform" called PointClickCare.6 PharMerica also uses its own "proprietary medicine dispensing system known as the LTC400" to fill prescriptions received through PointClickCare.7 Prescription data transmitted via PointClickCare is not migrated automatically to the LTC400 to create an order for filling a prescription. Instead, when a prescription is received through the PointClickCare system, a pharmacy technician or data entry clerk at PharMerica manually inputs the prescription information into the LTC400.8

B. Overview of Medicare Part D

"Medicare is a federally funded and administered health insurance program for certain groups, primarily elderly and disabled persons."9 "The Department of Health and Human Services (‘HHS’) administers the Medicare program through the Centers for Medicare and Medicaid Services (‘CMS’)."10 Relevant here are two components of the Medicare program: Part A, the hospital insurance benefits program,11 and Part D, the voluntary prescription drug benefit program.12

"Medicare Part D is based on a private market model, wherein Medicare contracts with private entities, known as Part D ‘sponsors,’ to administer prescription drug plans."13 "Part D [p]lan sponsors subcontract with many entities to provide drugs to the Medicare Part D beneficiaries enrolled in their plans."14 PharMerica is one such subcontractor.15 Its contracts with Part D plan sponsors "require PharMerica to comply with applicable federal laws, regulations, and CMS instructions."16 This is also true of PharMerica's contracts under the analogous state Medicaid programs.17

PharMerica certifies its compliance with applicable laws and regulations each time it submits a claim for reimbursement. When a pharmacy like PharMerica "dispenses drugs to a Medicare beneficiary, it submits an electronic claim to the beneficiary's Part D plan and receives reimbursement from the plan sponsor for the costs not paid by the beneficiary."18 That claim submission must be accompanied by a certification of compliance with applicable laws and regulations,19 including compliance with the requirement that drugs be dispensed only pursuant to a valid prescription.20 This is also true of PharMerica's claims under the analogous state Medicaid programs.21 PharMerica also receives direct payments from nursing home facilities using Medicare Part A funds with analogous requirements.22

438 F.Supp.3d 255

C. Relator Sturgeon's Investigation

Reliant Health Management Services is the owner and operator of more than twenty nursing homes in Pennsylvania.23 In June 2013, Reliant began using PharMerica as its institutional pharmacy.24 Soon after Reliant switched to PharMerica, it noticed that its "nursing home facilities experienced a significant increase in pharmacy costs ranging from $2.00-$3.00 per patient per day."25 Reliant complained.26 PharMerica's Senior Vice President for Sales and Marketing Mark Lindemoen asked Sturgeon, who by that time was working at PharMerica as its Executive Vice President, to review the issue.27

As she reviewed Reliant's complaint, Sturgeon began to notice "significant discrepancies" between prescription order data received via PointClickCare and prescription fill data in the LTC400.28 That is, it appeared to Sturgeon that on some occasions PharMerica had dispensed medications different from those prescribed. These discrepancies "consistently favored PharMerica's bottom line."29 Sturgeon brought her findings to Lindemoen, who "refused to acknowledge the problems" or investigate further.30 When Sturgeon raised the issue with him again after returning from a brief medical leave, Lindemoen "shut down the meeting and ordered Sturgeon to stop her investigation."31 Other senior-level management executives responded similarly.32

After Sturgeon reported her findings to management, "there was an unexplained and sudden diminution of Sturgeon's duties and responsibilities."33 Sturgeon was "removed from the Mid-Atlantic region sales and marketing strategies and development initiatives" and stripped of her authority to negotiate and terminate contracts and to review and approve capital expenditures and development projects and of her responsibility for "all customer relationships in Florida."34 This diminution in her job responsibilities was "retaliatory."35 Sturgeon resigned her position.36

After leaving PharMerica, Sturgeon began working as a consultant in the nursing home and pharmacy industries.37 Reliant retained her to audit its relationship with PharMerica.38 Relators Ferrante, Sciole, and Niles are corporate officers at Reliant and appear to have been involved in the audit.39 In conducting the audit, Sturgeon confirmed the discrepancies she had identified while employed at PharMerica and discovered the source of those discrepancies: an alleged scheme to alter prescriptions systematically so as to increase reimbursements.40

438 F.Supp.3d 256

D. Alleged Prescription Alteration Scheme

Relators' audit revealed that PharMerica systematically altered prescriptions "and did so to enhance its profit margins and increase its rebates from manufacturers and suppliers."41 The use of both the PointClickCare system and the LTC400 made this possible in two ways. First, the system of manually entering prescription data received via PointClickCare allowed PharMerica to direct its clerks to alter the data intentionally.42 That is, in some instances, the data as originally entered in the LTC400 did not match the prescription data received via PointClickCare. Second, the LTC400 itself was programmed so that whenever an ordered drug was out of stock, the platform would prompt clerks to replace it with the most profitable alternative, even if the data was correctly transcribed.43 In either case, PharMerica did not comply with applicable laws and regulations requiring that pharmacists get the prescribing physician's consent before altering any essential element of a prescription.44

Relators allege that PharMerica illegally altered prescriptions in this manner for both controlled and non-controlled substances, sometimes altering the drug's dosage and other times altering its form (i.e., tablet vs. capsule) or the drug itself (i.e., brand name vs. generic).45 Specifically, Relators allege that their audit turned up at least 5,687 instances of PharMerica altering dosages without notice to the prescribing physician;46 10,540 instances of PharMerica altering drug forms without notice;47 and an unspecified number of instances of PharMerica dispensing a brand-name drug instead of the prescribed generic drug.48

E. Procedural Background

Relators filed this qui tam action in 2015. The case was voluntarily dismissed in 2018 after Relators' attorney informed them that the United States had declined to intervene, but Relators then moved for relief pursuant to Federal Rule of Civil Procedure 60(b), arguing that their counsel never informed them that he was filing a notice of dismissal.49 Indeed, when the notice of dismissal was filed, Relators were in the process of seeking replacement counsel, as their counsel would no longer represent them after the United States declined to intervene.50 The Court granted the motion and reopened the case.51

After the case was reopened, Relators filed the First Amended Complaint, which is the operative pleading here.52 PharMerica...

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