United States ex rel. Lisitza v. Par Pharm. Cos.

• Decision Date: 10 May 2017
• Docket Number: No. 06 C 06131,06 C 06131
• Citation: 276 F.Supp.3d 779
• Parties: UNITED STATES EX REL. Bernard LISITZA, et al., Plaintiffs, v. PAR PHARMACEUTICAL COMPANIES, INC., Defendant.
• Court: U.S. District Court — Northern District of Illinois

276 F.Supp.3d 779

UNITED STATES EX REL. Bernard LISITZA, et al., Plaintiffs,

v.PAR PHARMACEUTICAL COMPANIES, INC., Defendant.

No. 06 C 06131

United States District Court, N.D. Illinois, Eastern Division.

Signed May 10, 2017

Filed August 17, 2017

AUSA, Linda A. Wawzenski, United States Attorney's Office, David Joel Chizewer, Meredith S. Kirshenbaum, Roger Andrew Lewis, Goldberg Kohn Ltd., William W. Thomas, Michael I. Behn, Daniel R. Hergott, Behn & Wyetzner, Chartered, Chicago, IL, Kristen M. Kemp, Office of the Indiana Attorney General, Indianapolis, IN, Elizabeth Valentine, Assistant Attorney General for the State of Michigan, Susan I. Hellerman, State of MI–Office of the Attorney General–Health Care Fraud, East Lansing, MI, Evans Robert Jason, Michigan Department of Attorney General, Lansing, MI, Richard E. Salisbury, Office of the Attorney General of Texas, Austin, TX, Linda Wyetzner, Behn & Wyetzner, Chartered, Evanston, IL, for Plaintiffs.

Michael Thomas Layden, Richard J. Prendergast, Richard J. Prendergast, Ltd., Rick C. Shea, Swanson, Martin & Bell, Robert M. Andalman, A & G Law LLC, Chicago, IL, David Keith Clouser, Jennifer G. Wicht, Paul K. Dueffert, Yifan Wang, Katherine Hayes Norton, Williams & Connolly LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION AND ORDER

John J. Tharp, Jr., United States District Judge

In this qui tam action brought primarily under the federal False Claims Act and parallel state statutes, the plaintiffs—the United States, the State of Michigan, and the State of Indiana—allege that defendant Par Pharmaceutical Companies, Inc., caused national pharmacy chains to submit false claims for reimbursement from Medicaid by inducing them to fill prescriptions not with the generic drugs originally prescribed but with more expensive forms and dosages of those drugs manufactured by Par. The plaintiffs maintain that the pharmacies' reimbursement claims were "inherently" false because the pharmacies "overcharged" the government, but that argument reads the requirement of a false or misleading statement out of the False Claims Act. The reimbursement claims were not "inherently" nor expressly false simply because the government paid more for Par's drugs than it would have paid for the form or dosage that was originally prescribed.

The plaintiffs also maintain that the claims were false because they omitted information that the drug for which reimbursement was sought was not the originally prescribed drug but an alternate form or dosage strength selected to circumvent the reimbursement cap that applied to the originally prescribed drug, without regard for regulations requiring physician authorization and the dispensing of only medically necessary and economical treatments. The claims therefore implicate the Supreme Court's recent decision in Universal Health Services, Inc. v. United States ex rel. Escobar , ––– U.S. ––––, 136 S.Ct. 1989, 195 L.Ed.2d 348 (2016), which addressed the scope of liability under the False Claims Act for "implied false certification," that is, the submission of claims that omit material information about regulatory non-compliance. Par maintains, and the Court agrees, that under the standard established in Escobar, the reimbursement claims it submitted were not false or misleading.

Furthermore, Par's motion argues that the plaintiffs lack evidence of even one claim for reimbursement for a drug that was switched in a manner that arguably violated the law because there was no physician approval, no demonstration of "medical necessity," and no proof that the drug dispensed was the most "economical" choice. The plaintiffs did not put proof of any such claim in the record; they refer to their expert witnesses' identification of statistical trends instead, and argue that they have no burden until trial to show evidence of the false claims. But that is not how summary judgment works. The plaintiffs have not presented evidence sufficient to support a finding that any particular claim the pharmacies filed was false, even according to their own theory. Accordingly, Par's summary judgment motions are granted.

I. BACKGROUND

This is the fourth of a related set of four qui tam FCA suits, the first dating from September 2001, which the relator Bernard Lisitza filed against the pharmacies Omnicare, Walgreens, and CVS, respectively, and finally against Par and three other drug makers that are no longer defendants. All allege an unlawful prescription-switching scheme (i.e. , the unauthorized substitution of more expensive pills) that resulted in overcharging the Medicaid program and, therefore, violating the FCA. In this case, the United States and the states of Michigan and Indiana intervened and filed separate complaints. Many other states permitted the relator to litigate their claims for them.¹ In the current motions Par seeks summary judgment on the merits against the United States, Michigan, and Indiana, arguing that it is entitled to judgment as a matter of law because the plaintiffs cannot establish the falsity of the claims on which the lawsuit is based.

A. The Complaints

The operative pleading of the United States is the Corrected Second Amended Complaint of July 9, 2013, which names only Par as a defendant. See Corrected Second Amended Complaint ("CSAC"), ECF No. 231. Michigan and Indiana filed their own complaints, see Mich. Compl., ECF No. 69; Ind. Am. Compl., ECF No. 148. Although the complaints are separate, and Par moved against each plaintiff separately, the complaints are substantially similar and the United States, Michigan, and Indiana filed a joint opposition brief and joint statements of fact. Accordingly, except where necessary to distinguish between these governmental parties, this opinion will simply refer to all three of these governmental parties as "the plaintiffs."

In general, the plaintiffs allege that Par orchestrated an illegal prescription-switching scheme by developing or acquiring the rights to manufacture and/or distribute widely available generic drugs, but in different dosage strengths or forms than those commonly offered by competitors, and then marketing its drugs to pharmacies based on their ability to obtain higher Medicaid reimbursements for Par's products, which were not subject to standard reimbursement caps because they were so unusual. To effect the scheme, the pharmacies programmed their automated systems to automatically switch drugs to Par's atypical versions of commonly prescribed medications. Specifically, this case pertains to the following so-called "subject drugs": 10– and 20–mg tablets of fluoxetine (generic Prozac, an anti-depressant), 150– and 300–mg capsules of ranitidine (generic Zantac, an antacid), and 7.5–mg tablets of buspirone (generic Buspar, an anti-anxiety medicine). Par's drugs were alternatives to the fluoxetine capsules in the same strengths, ranitidine tablets in the same strengths, and buspirone tablets in a 15–mg strength—the dosage most commonly prescribed. This case relates only to the dispensing of the subject drugs by two pharmacies, Omnicare and Walgreens. More precisely, the complaint alleges that Par induced Omnicare to offer its fluoxetine and buspirone products, but not ranitidine, the third subject drug. Walgreens is alleged to have dispensed all three subject drugs.

The plaintiffs assert that the subject drugs were dispensed without physician approval, were not "medically necessary," and were not economical within the meaning of governing state and federal Medicaid regulations, and further that Par and the pharmacies acted solely based on a profit motive, all in violation of the False Claims Act because their actions violated the regulations and consequently inflated the costs to Medicaid. The plaintiffs also allege a conspiracy between Par and the pharmacies, as well as common-law fraud; finally, Michigan and Indiana separately allege state common-law torts of unjust enrichment (both), and theft and offense-against-property (Indiana only).

B. Par's Motions

In seeking summary judgment on the merits, Par argues that the plaintiffs cannot meet their burden of establishing that Par caused the submission of claims that were false within the meaning of the FCA or the parallel state statutes. Par further argues that the other claims necessarily fail as well, based on the absence of falsity. This opinion jointly addresses Par's three motions.

Since the close of briefing, the parties have filed, with leave of court, supplementary briefs addressing the impact of the Supreme Court's decision in Universal Health Services, Inc. v. United States and Massachusetts ex rel. Escobar and Correa ("Escobar "), ––– U.S. ––––, 136 S.Ct. 1989, 195 L.Ed.2d 348 (2016). See Pls. Suppl. Brief, ECF No. 398; Par Suppl. Br., ECF No. 399. That case pertains to the so-called "implied false certification" theory that, according to Par anyway, is the theory underlying the plaintiffs' FCA claims.

In reviewing the motions for summary judgment, the Court must view the facts and draw reasonable inferences in favor of the non-moving parties, to the extent they are supported by the record. United States ex rel. Yannacopoulos v. Gen. Dynamics , 652 F.3d 818, 823 (7th Cir. 2011). Under Local Rule 56.1(a)(3) & (b)(3), the parties must set forth, and respond to, proposed undisputed facts and provide support with admissible evidence. See also Fed. R. Civ. P. 56(c) & (e). They have done so here, albeit with a great deal of improper argument folded in. The bulk of the factual disputes presented by the parties are not material to the resolution of these motions, which simply argue that the plaintiffs cannot prove falsity as a matter of law. The immaterial facts are omitted.

II. FACTS

The Medicaid program, one type of government-sponsored insurance, is a Third Party Payor ("TPP") that reimburses pharmacies for the cost of filling prescriptions dispensed to the program participants. Under the Medicaid system, retail and institutional pharmacies (such as...