United States v. Walgreen Co.

• Decision Date: 30 September 2019
• Docket Number: Case No. 14-cv-1558
• Citation: 417 F.Supp.3d 1068
• Parties: UNITED STATES of America, et al., Plaintiffs, v. WALGREEN CO., James G. Kulekowskis, Jr., and Christopher G. Hayes, Defendants.
• Court: U.S. District Court — Northern District of Illinois

417 F.Supp.3d 1068

UNITED STATES of America, et al., Plaintiffs,

v.WALGREEN CO., James G. Kulekowskis, Jr., and Christopher G. Hayes, Defendants.

Case No. 14-cv-1558

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

Signed September 30, 2019

Linda A. Wawzenski, AUSA, United States Attorney's Office, Joseph Bradley Chervin, Elisa Cervantes Hamilton, Melissa Taormina Guske, Office of the Illinois Attorney General, Chicago, IL, for Plaintiffs.

Sarah Castillo Baier, pro se.

Rita Svendsen Baier, pro se.

Tinos Diamantatos, Jane E. Dudzinski, Megan Rose Braden, Morgan, Lewis & Bockius LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

John Robert Blakey, United States District Judge Relators and Plaintiffs Sarah Castillo Baier (Castillo-Baier) and Rita Svendsen Baier (Svendsen-Baier) (collectively Relators) have brought a qui tam action under the False Claims Act (FCA), 31 U.S.C. § 3729 et seq. , (Counts I & II) and its Illinois counterpart, the Illinois False Claims Act (IFCA), 740 ILCS Comp. Stat. 175/1 et seq. , (Counts III & IV) on behalf of the United States and the State of Illinois. [65].

Relators sue Defendants Walgreen Co. (Walgreens) and James G. Kulekowskis, alleging that they induced patients and providers to use a Walgreens specialty pharmacy location by: (1) routinely and systematically waiving copayments for Medicaid and Medicare patients; and (2) automatically refilling prescriptions for these same patients. Id. ¶¶ 3, 185. On September 27, 2018, Defendants Walgreens and Kulekowskis moved to dismiss Relators' Second Amended Complaint (SAC). [70].

On August 7, 2018, the United States and State of Illinois (collectively the Government) filed a Joint Complaint in Intervention (JCI) against Defendants Walgreens, Kulekowskis, and Christopher G. Hayes¹ pursuant to the FCA (Counts I & II) and ICFA (Counts III & IV), alleging that they automatically refilled prescriptions for Illinois Medicaid patients at the same Walgreens specialty pharmacy at issue in Relators' SAC. [64] ¶¶ 1, 3. The Government also brought claims for common law fraud (Count V), unjust enrichment (Count VI), and payment by mistake (Count VII)² based upon these same allegations. [64] ¶¶ 104-11. The Government, unlike Relators, did not bring claims based upon any copayment waivers. See generally [64]. On September 27, 2018, Defendants Walgreens, Kulekowskis, and Hayes moved to dismiss the Government's JCI. [68].

For the reasons explained below, this Court grants both motions to dismiss, [68] [70].

I. BACKGROUND

The following facts come from the Government's JCI, [64], and Relators' SAC, [65].

A. The Parties

The federal government and state of Illinois jointly fund and administer the Medicare and Medicaid programs in Illinois. [64] ¶¶ 7-8; [65] ¶¶ 21, 29-33.

Defendant Walgreens is an Illinois corporation authorized to do business in the United States, Puerto Rico, and Guam, with its corporate office in Deerfield, Illinois. [64] ¶ 9. Walgreens operates a chain of retail drugstores that sell, among other items, prescription drugs. Id. In addition to over 8,000 retail stores, Walgreens owns and operates more than 700 specialty pharmacies through its Specialty Pharmacy division. Id. This division provides specialized medication for complex, genetic, rare, and chronic health conditions. Id. This case concerns Walgreens' C&M Specialty Pharmacy (C&M) located in Glenview, Illinois. Id. ¶ 3.

Defendant James G. Kulekowskis, Jr. is a Doctor of Pharmacy (Pharm.D) and licensed pharmacist in Illinois and Florida. Id. ¶ 10. At all times relevant to this case, Kulekowskis worked as the pharmacy manager of C&M, with responsibility for overseeing all business and operations there. Id. Defendant Christopher Hayes is a licensed pharmacist. Id. ¶ 11. At all times relevant to this case, Hayes worked as the supervisor of all pharmacists and technicians employed at the C&M location. Id. Both Kulekowskis and Hayes reside in Illinois. Id. ¶¶ 10-11.

Relator Castillo-Baier resides in Illinois and worked for Walgreens from July 2002 through July 2017. [65] ¶ 15. She holds a pharmacy technician certification and began working as a Senior Certified Technician at Walgreens in 2007. Id. In May 2013, Walgreens transferred Castillo-Baier from one of its retail pharmacy locations in Arlington Heights to C&M. Id. ¶ 16. She worked as a pharmacy technician at C&M from May 2013 through December 2013, after which Walgreens transferred her to C&M's finance department. Id. ¶ 17. Castillo-Baier worked in C&M's finance department from January 2014 until she resigned, effective July 5, 2017. Id.

Relator Svendsen-Baier also resides in Illinois and worked for Walgreens from February 2002 until November 2013. Id. ¶ 18. She worked as a Certified Pharmacy Technician until November 2011, when she became a student pharmacist/pharmacy intern and no longer required certification. Id. Svendsen-Baier worked with Defendant Kulekowskis for approximately one year between 2003 and 2004, and from time to time between May and December 2010, at C&M. Id. ¶ 19.

B. The Medicaid Program

The Medicaid Program, 42 U.S.C. § 1396 et seq. , is a government health insurance program funded jointly by the federal and state governments to assist people and families with low income and limited resources. [64] ¶ 21. The Centers for Medicare and Medicaid Services (CMS), within the United States Department of Health and Human Services (HHS), administers Medicaid on the federal level. Id. ¶¶ 22-23. Within broad federal rules, however, each state decides who is eligible for Medicaid, the services covered, payment levels for services, and administrative and operation procedures. Id. ¶ 23. The state directly pays the providers of Medicaid services and obtains the federal share of the payment from accounts drawn on funds of the United States Treasury. Id.

Providers of prescription drugs for Medicaid patients who participate in the Medicaid program are eligible for reimbursement for covered prescriptions. Id. ¶ 24. To enroll in the Illinois Medicaid program, pharmacies must submit an enrollment application that contains, in relevant part, a certification that "all of the information provided in this application process is true, correct and complete and that the enrolling provider is in compliance with all applicable federal and state laws and regulations." Id. ¶ 26. Once enrolled in the Illinois Medicaid program, each pharmacy must sign the Illinois Medicaid Provider Agreement, which provides, in part, that providers will comply with all current and future program policy and billing provisions. Id. ¶ 27. Defendant Walgreens, doing business as C&M Pharmacy LLC, executed such a Provider Enrollment Agreement with the Illinois Medicaid program dated July 1, 2006. Id. ¶ 28.

Claims submitted to Illinois Medicaid may also be submitted electronically. With respect to electronically-filed claims, the Illinois Medicaid Policy Handbook states, in relevant part:

Paper claim forms all contain a certification statement, which the provider is required to sign. By signing the form, the provider is attesting to the accuracy of the information contained therein.

Electronic claims and claims created by the Department do not contain a certification statement, nor is there a way for the provider to sign electronic claims at the time of submittal. Instead, the Department has instituted a post-payment certification as described below.

A copy of Form HFS 194-M-C, Billing Certification, accompanies each remittance advice which contains an electronically submitted paid service or a service paid as a result of a claim created by the Department.

It is the responsibility of the provider who provided the service and submitted the claim for payment to review the Remittance Advice and the Billing Certification form attesting the accuracy of the information therein.

The same signature requirements that apply to the signing of a paper claim, as described in Topic 112.7.1, apply to Form HFS 194-M-C.

[65] ¶ 43. Form 194-M-C, the billing certification form, contains the following language: "I understand payment is made from State and Federal funds and any falsification or concealment of a material fact may be cause for prosecution or other appropriate legal action." Id. ¶ 45.

According to Relators, Walgreens received Form 194-M-C in connection with each claim submitted electronically to Illinois Medicaid. Id. ¶ 46.

C. The Medicare Program

The Medicare Program, 42 U.S.C. § 1395 et seq. , is a government health insurance program funded jointly by the federal and state governments to assist the elderly and disabled. Id. ¶ 29. CMS administers Medicare on the federal level. Id. ¶ 30. Medicare reimburses health care providers for covered services given to Medicare patients. Id. ¶ 33. In doing so, Medicare determines what types of services are covered and therefore reimbursable, and at what rate it will reimburse the covered service. Id. Providers enrolled in the Medicare program agree to submit claims only for medically and reasonably necessary services covered under the program, and to only seek compensation to which the provider is legally entitled. Id.

Pharmacies such as Walgreens who wish to enroll in Medicare must complete Medicare Enrollment Application – Clinics/Group Practices and Certain Other Suppliers, Form CMS-855B. Id. ¶ 34. Form 855B contains the following certification:

I agree to abide by the Medicare laws, regulations and program instructions that apply to this supplier. The Medicare laws, regulations, and program instructions are available through the Medicare contractor. I understand that payment of a claim by Medicare is conditioned upon the claim and the underlying transaction complying with such laws, regulations, and program instructions (including, but not limited to, the Federal anti-kickback statute and the Stark law), and on the supplier's compliance with all applicable conditions of participation in Medicare.

Id. ¶ 35.

D. C&M Operating Structure

...