United States v. Omnicare, Inc.
| Decision Date | 19 March 2021 |
| Docket Number | No. 1:15-cv- 4179 (CM),1:15-cv- 4179 (CM) |
| Parties | UNITED STATES of AMERICA, et al. ex rel. URI BASSAN Plaintiffs and Relator, v. OMNICARE, INC.; CVS HEALTH CORP., Defendants |
| Court | U.S. District Court — Southern District of New York |
This is a qui tam False Claims Act ("FCA") action originally brought in June 2015 by relator Uri Bassan on behalf of the federal government, 29 states, and the District of Columbia against Omnicare, Inc., a long-term pharmacy. After several years of investigation, the United States intervened in the action in late 2019, filing a complaint against Omnicare and CVS Health Corp., which had completed its purchase of Omnicare in August 2015. The individual states have declined to intervene.
At bottom, both Bassan and the government allege that between 2010 and 2018, Omnicare consistently dispensed prescription drugs to individuals living at long-term residential facilities that were not supported by valid prescriptions. Omnicare allegedly dispensed drugs based on prescriptions that had expired, had run out of refills, or were otherwise invalid. Although the drugs were dispensed illegally (i.e., without a valid prescription), Omnicare still submitted claims for reimbursement to several federal healthcare programs. These submissions for reimbursement are alleged to have contained false information in violation of the FCA. In total, the government alleges that Omnicare dispensed drugs based on invalid prescriptions to potentially tens of thousands of individuals living at more than 3,000 residential facilities. (Gov't Compl., Dkt. No. 17 at ¶¶ 146, 149).
Presently before the Court are three motions to dismiss: (1) Omnicare's motion to dismiss the government's intervenor complaint; (2) Omnicare's motion to dismiss Bassan's complaint (primarily its remaining state-law claims); and (3) CVS's motion to dismiss for two reasons additional to the ones stated in Omnicare's motions. For the reasons that follow, all three motions are denied.
The plaintiffs are the United States of America and the states upon whose behalf Bassan originally filed his complaint. Relator Uri Bassan is a pharmacist who previously worked as the Pharmacist-in-Charge at an Omnicare pharmacy in Albuquerque, New Mexico.
Defendant Omnicare is a Delaware corporation that has its principal place of business in Ohio. Omnicare is the nation's largest provider of pharmacy services to long-term care facilities - facilities like nursing homes and assisted-living facilities. Omnicare employs around 13,000 employees and operates approximately 160 pharmacies across 47 states. It dispenses tens of millions of prescription drugs to residents of long-term care facilities each year. During the relevant period (2010-2018), Omnicare submitted over 35 million claims seeking payment for drugs dispensed to Medicare beneficiaries residing in assisted-living facilities, alone.
Defendant CVS Health Corporation owns thousands of retail pharmacies throughout the United States. CVS purchased Omnicare for approximately $12.7 billion in mid-2015 and began overseeing its operations shortly thereafter.
The False Claims Act permits private citizens to file qui tam actions as "relators" to recover damages for fraud on behalf of the United States. "[W]hile the False Claims Act permits relators to control the False Claims Act litigation, the claim itself belongs to the United States," meaning that the federal government can intervene in any qui tam action filed on its behalf. United States ex rel. Bilotta v. Novartis Pharms. Corp., 50 F. Supp. 3d 497, 508 (S.D.N.Y. 2014) (quoting United States ex rel. Mergent Servs. v. Flaherty, 540 F. 3d 89, 93 (2d Cir. 2008)). If the government decides to intervene, then it "shall have the primary responsibility for prosecuting the action, and shall not be bound by an act of the person bringing the action." 31 U.S.C. § 3730(c)(1). Courts have interpreted this to mean that "by automatic operation of the statute, the Government's complaint in intervention becomes the operative complaint as to all claims in which the government has intervened." Bilotta 50 F. Supp. 3d at 511-12 (quoting United States ex rel. Sansbury v. LB & B Associates, Inc., 58 F. Supp. 3d 37, 47 (D.D.C. 2014)).
Relators are entitled to recover a portion of the damages owed to the United States if the action is ultimately successful. If the government declines to intervene, the relator is entitled to between 25 to 30 percent of any recovery he or she can obtain. 31 U.S.C. § 3730(d)(2). If the government does intervene and takes over in prosecuting the case, the relator can still receive between 15 and 25 percent of any recovery the government obtains. Id. at § 3730(d)(1).
Enacted in 1863, the FCA "was originally aimed principally at stopping the massive frauds perpetrated by large contractors during the Civil War." Universal Health Servs., Inc. v. United States, 136 S. Ct. 1989, 1996 (2016) (quoting United States v. Bornstein, 423 U.S. 303, 309 (1976)). Although the Act has since been amended several times, "its focus remains on those who present or directly induce the submission of false or fraudulent claims" to the government. Ibid.
The Act imposes liability on several types of falsity. First, it prohibits "factually" false claims - where the party submitting the claim provides "an incorrect description of the goods and services provided or a request for reimbursement for goods and services never provided." United States ex rel. Kester v. Novartis Pharms. Corp., 23 F. Supp. 3d 242, 260-61 (S.D.N.Y. 2014) (citation omitted). Second, it prohibits "legally" false claims - where a party submits a claim that contains a statement averring compliance with a federal statute or regulation when, in fact, the party was not complaint. See United States ex rel. Grubea v. Rosicki, Rosicki & Assocs., P.C., 318 F. Supp. 3d 680, 699 (S.D.N.Y. 2018). Third, the Act imposes liability where a party "knowingly makes . . . a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government." These last set of claims are known as "reverse false claims" because it imposes liability for failure to pay money owed to the government, rather than for obtaining money from the government. See United States ex rel. Foreman v. AECOM, 454 F. Supp. 3d 254, 268 (S.D.N.Y. 2020). The government alleges the defendants violated the FCA based on all three theories of liability.
As the government's complaint is the operative complaint for purposes of the federal claims in this action, the overview of the allegations against the defendants are taken from it.
Federal law defines a prescription drug as one that "is not safe for use except under the supervision of a practitioner licensed by law to administer such drug." 21 U.S.C. § 353 (b)(1). Such drugs cannot be dispensed without a valid prescription, and federal law prohibits reimbursement for dispensations not supported by a valid prescription. The statutes and regulationsguiding the three federal programs relevant to this suit: Medicare, Medicaid, and TRICARE (together, the "Federal Healthcare Programs"), all prohibit reimbursement for prescription drugs dispensed without a valid prescription. See, e.g., 42 C.F.R. §§ 423.104(h); 440. 120(a) (Medicare); 42 U.S.C. §§ 1395w-102(e); 1396d(a) (12) (Medicaid); 32 C.F.R. § 199.9(a)(4) (TRICARE).
The crux of any FCA action is the false claim. Generally, whenever a pharmacy dispenses a drug for a beneficiary of any of these Federal Healthcare Programs, it will file a claim with the Program (either directly or indirectly through a third-party) to obtain reimbursement for the portion of the drug not paid out-of-pocket by the beneficiary.
Medicare beneficiaries receive prescription drug benefits through the Part D program, which is administered by private companies known as "Part D sponsors." Pharmacies like Omnicare submit "prescription drug event" data ("PDE") to Part D sponsors any time a prescription drug is dispensed. PDE data contains information such as the drug's name, its prescriber, how the prescription was transmitted to the pharmacy, the number of times the prescription was filled, and the quantity dispensed. The Part D Sponsor then submits the pharmacy's PDE data to the Centers for Medicare and Medicaid Services ("CMS"), to obtain reimbursement for the pharmacy. Courts have long held that pharmacies' "PDEs, if they are alleged to contain false or inaccurate data, are false claims for purposes of the FCA." United States v. TEVA Pharms. USA, Inc., No. 13-cv-3702 (CM), 2016 WL 750720, at *25 (S.D.N.Y. Feb. 22, 2016); cf United States ex rel. Spay v. CVS Caremark Corp., 875 F.3d 746, 750 (3d Cir. 2017); 42 C.F.R. § 423.505(k)(3) ().
Medicaid is a joint federal-state program that provides healthcare benefits for certain groups, primarily the poor and disabled. The federal government provides a portion of each state's Medicaid payments, but the programs are administered state-by-state. The federal Medicaid statute requires each participating state to implement plans containing specified minimum criteria for coverage and payment of claims. See, e.g., 42 U.S.C. §§ 1396, 1396a(a)(13), 1396a(a)(30)(A). Like with Medicare, Medicaid coverage extends only to "prescribed drugs." 42 U.S.C. § 1396d(a)(12).
Whenever a Medicaid beneficiary submits a prescription drug claim to a pharmacy, the pharmacy dispenses...
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