U.S. ex rel. Quinn v. Omnicare Inc.

• Decision Date: 01 September 2004
• Docket Number: No. 03-2187.,03-2187.
• Citation: 382 F.3d 432
• Parties: UNITED STATES of America, ex rel.; Thomas G. QUINN, Bringing this Cause of Action on Behalf of the United States of America v. OMNICARE INC.; Pompton Nursing Home Suppliers, Inc., (A Wholly-Owned Subsidiary of Omnicare, Inc.); Alan Traster, Individually and in His Capacities as an Officer of Omnicare, Inc. and Pompton Nursing Home Suppliers and Various John Doe Companies Who Process Medications Returned from Patients at Long-Term Care Facilities Located in the State of New Jersey Pursuant to Their Contractual Relations With New Jersey Medicaid/PAAD Programs; Cherry Hill Pharmacy, Ltc, (A Wholly-Owned Subsidiary of Omnicare, Inc.); Winslow's Pharmacy, (A Wholly-Owned Subsidiary of Omnicare, Inc.); Bach's Pharmacy East Thomas G. Quinn, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

382 F.3d 432

UNITED STATES of America, ex rel.; Thomas G. QUINN, Bringing this Cause of Action on Behalf of the United States of America v. OMNICARE INC.; Pompton Nursing Home Suppliers, Inc., (A Wholly-Owned Subsidiary of Omnicare, Inc.); Alan Traster, Individually and in His Capacities as an Officer of Omnicare, Inc. and Pompton Nursing Home Suppliers and Various John Doe Companies Who Process Medications Returned from Patients at Long-Term Care Facilities Located in the State of New Jersey Pursuant to Their Contractual Relations With New Jersey Medicaid/PAAD Programs; Cherry Hill Pharmacy, Ltc, (A Wholly-Owned Subsidiary of Omnicare, Inc.); Winslow's Pharmacy, (A Wholly-Owned Subsidiary of Omnicare, Inc.); Bach's Pharmacy East Thomas G. Quinn, Appellant.

No. 03-2187.

United States Court of Appeals, Third Circuit.

Argued on December 16, 2003.

Filed September 1, 2004.

Appeal from the United States District Court for the District of New Jersey, Dickinson R. Debevoise, J.

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Harvey S. Mars, (Argued), Leibowitz & Mars, New York, NY, for Appellant.

Harry R. Silver, (Argued), Patton Boggs, Washington, DC, James A. Robertson, Kalison, McBride, Jackson & Murphy, Liberty Corner, NJ, Peter S. Pearlman, Jessica V. Henry, Cohn, Lifland, Pearlman, Herrmann & Knopf, Saddle Brook, NJ, E. John Steren, Ober, Kaler, Grimes and Shriver, Washington, DC, for Appellees.

Before ROTH, McKEE and ROSENN, Circuit Judges.

ROTH, Circuit Judge.

Omnicare, Inc., a Medicaid-provider pharmacy, and various of its subsidiaries, including Pompton Nursing Home Suppliers (Pompton), were charged by Thomas Quinn with submitting false claims in violation of the False Claims Act (FCA), 31 U.S.C. § 3729 et seq.¹ Quinn bases his allegations on the fact that Medicaid pays for medications that the defendant pharmacies dispense to Medicaid beneficiaries but, if a medication is subsequently returned to a defendant pharmacy for resale, the pharmacy credits Medicaid with only 50% of what Medicaid had paid the pharmacy for the medication. We find that the lack of legal authority, requiring Medicaid-provider pharmacies to credit Medicaid when a medication is returned for resale, is disturbing. We conclude, however, that there can be no FCA liability in the absence of such authority. In addition, Quinn's failure to present evidence of the actual submission of a single false claim to Medicaid is fatal to this qui tam action.

I. FACTUAL BACKGROUND

Pompton is a Medicaid-provider pharmacy that provides medications to individuals residing in long-term care facilities. Long-term care facilities, which include nursing homes, provide care to patients who participate in medical insurance programs, including Medicaid. Approximately sixty percent of the medications that Pompton dispenses are paid for by New Jersey Medicaid.² The remainder are paid for by the patients themselves or by private insurers. After a Medicaid-provider pharmacy has supplied a medication to a Medicaid patient, the pharmacy submits a claim to Medicaid. Medicaid then pays the pharmacy for the medication. Instructions for filing Medicaid claims are set forth in New Jersey Medicaid's Pharmacy Services Fiscal Agent Billing Supplement (FABS). FABS instructs provider pharmacies to submit Medicaid pharmacy claims on the MC-6 form. The MC-6 claim form contains a "Provider Certification" which the provider must sign:

I certify that the services covered by this claim were personally rendered by me or under my direct supervision ... and that the services covered by this claim and the amount charged thereof are in accordance with the regulations of the New Jersey Health Services Program;³ and that no part of the net amount payable under this claim has been paid; and that payment of such amount will be accepted as payment in full without additional charge to the patient or to others on his behalf.... I understand that ... any false claims, statements or documents, or concealment of a material fact, may be prosecuted under applicable federal or State law, or both.

On some occasions, the medications, for which Pompton has submitted a claim and received full reimbursement from Medicaid, are returned.⁴ New Jersey pharmacy regulations allow Medicaid provider pharmacies to recycle returned unit dose packaged medications if they have been stored properly and the seal and control number remain intact. See N.J.A.C. § 13:39-9.15.⁵ When Pompton receives returned medications for recycling, it is Pompton's practice to send Medicaid a check for 50% of the cost of the returned medications.⁶ Pompton justifies retaining the other 50% to cover the expense of restocking and redispensing the medications.

The qui tam plaintiff, Thomas Quinn, was Pompton's regional comptroller. Quinn alleges that it was Pompton's practice, when medications were returned, to push out the individual tablets and capsules from their sealed packages and place them in separate containers for subsequent use. Quinn claims that he observed workers in the return department removing pills from their original sealed containers by pushing them through their packaging and that he saw the workers create new packages for the pills by re-sealing the packages with irons. Quinn asserts that Pompton eventually redispensed the returned medications.

After Quinn learned that another recently acquired Omnicare subsidiary in Illinois had settled FCA claims because it had represented to Medicaid that medications were destroyed when they in fact had been returned and redispensed, he became concerned about Pompton's Medicaid recycling and crediting practices. He expressed his concern to Alan Traster, the president of Pompton, who told Quinn that Pompton was not required to credit New Jersey Medicaid for returned medications. Quinn memorialized his concerns in a memo to Traster. Quinn was dismissed by Pompton a few days later on August 22, 1997.

II. PROCEDURAL HISTORY

Quinn filed a complaint under seal against Pompton in the United States District Court for the District of New Jersey. Quinn brought the action under the qui tam provisions of the False Claims Act, 31 U.S.C. § 3729 et seq.,⁷ under New Jersey's Conscientious Employee Protection Act (CEPA), N.J.S.A. § 34:19-3, and under New Jersey common law. Quinn claimed that Pompton violated §§ 3729(a)(1), (2), and (7) of the FCA because it (1) failed "to submit adjustments in order to partially void claims (submitted on required MC-6 claim forms) where the medications supplied pursuant to those claims were ultimately returned," (2) sold "Medicaid the same medication twice," (3) submitted "Medicaid claims for pharmaceuticals that were removed from unit dose packaging in the recycling process, in violation of New Jersey Board of Pharmacy Regulations", and (4) returned "credits to Medicaid for less than 100% of the amount initially claimed for returned medications." United States ex rel. Quinn v. Omnicare, Inc., No. 98-2031(DRD), slip op. at 9-10 (D.N.J. filed March 28, 2003). Quinn claimed that his dismissal violated the anti-retaliation provisions of the FCA and CEPA. Quinn also brought a claim for unjust enrichment.

On cross-motions for summary judgment, the District Court granted summary judgment to Pompton on Quinn's FCA claims and his unjust enrichment claim. The court declined to exercise supplemental jurisdiction over Quinn's CEPA claim and dismissed it for lack of subject matter jurisdiction.

Quinn appeals the adverse disposition of his FCA claims.⁸

III. JURISDICTION AND STANDARD OF REVIEW

The District Court had jurisdiction pursuant to 28 U.S.C. § 1331 and 31 U.S.C. § 3732(a). We have appellate jurisdiction pursuant to 28 U.S.C. § 1291.

We exercise plenary review over the District Court's decision granting summary judgment and will use the same test applied below. Belitskus v. Pizzingrilli, 343 F.3d 632, 639 (3d Cir.2003). A district court may grant summary judgment when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The moving party bears the burden to show an absence of any genuine issues of material fact. "[I]nferences to be drawn from the underlying facts contained in the evidential sources ... must be viewed in the light most favorable" to the non-moving party. Hollinger v. Wagner Mining Equipment Co., 667 F.2d 402, 405 (3d Cir. 1981). "[I]f a disputed fact exists which might affect the outcome of the suit under the controlling substantive law," summary judgment is not appropriate. Belitskus, 343 F.3d at 639 (citation omitted). Any doubt a court has about the existence of a genuine issue of material fact should be resolved in the non-moving party's favor. Continental Ins. Co. v. Bodie, 682 F.2d 436, 438 (3d Cir.1982). Summary judgment is appropriate when there is no genuine issue of material fact to be resolved at trial. Gruenke v. Seip, 225 F.3d 290, 298 (3d Cir.2000).

IV. DISCUSSION

A. The Submission of the Initial Medicaid Claim

The FCA imposes liability on any person who

(1) knowingly presents, or causes to be presented, to an officer or employee of the United States Government ... a false or fraudulent claim for payment or approval;

(2) knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the Government....

31 U.S.C. §§ 3729(a)(1), (2). A person acts "knowingly" when he "(1) has actual knowledge of the information; (2) acts in deliberate ignorance of the truth or falsity of the information; or (3) acts in reckless disregard of the truth or falsity of the information, and no proof of specific intent to defraud is required." 31 U.S.C. § 3729(b).

Each time Pompton submits a claim for payment on the MC-6 form, it certifies that "the services covered by this claim were ... rendered ... and ... the services covered by this claim and the amount charged thereof are in accordance with ... [Medicaid] regulati...