438 F.Supp.3d 246
E.D. Pa.2020Background
- PharMerica is a national long‑term‑care pharmacy that receives nursing‑home prescriptions via PointClickCare and manually re‑enters them into its LTC400 dispensing system.
- Relator Lena Sturgeon (former PharMerica EVP) audited Reliant nursing‑homes after noticing higher pharmacy costs and found discrepancies between PointClickCare orders and LTC400 fills suggesting pharmacists or clerks altered prescriptions.
- Relators allege a systemic scheme: altering dosage, form, or substituting brand for generic (and altering controlled‑substance prescriptions) to increase profits and reimbursements; audit purportedly identified thousands of alterations.
- A prior qui tam (Denk) in which the government intervened alleged different misconduct (dispensing without any valid prescription, narcotics box and emergency‑dispense problems) and resulted in settlements and a Corporate Integrity Agreement (CIA) with PharMerica.
- The court denied PharMerica’s motion to dismiss most claims: it rejected dismissal under the government‑action and public‑disclosure bars (distinguishing Denk’s no‑prescription schemes from Relators’ alteration scheme); sustained FCA claims under 31 U.S.C. §§ 3729(a)(1)(A),(B) for non‑controlled, controlled, and brand/generic allegations; dismissed reverse‑false‑claims (§ 3729(a)(1)(G)) claims based on contingent CIA penalties and duplicative retention theory; and allowed Sturgeon’s retaliation claim to proceed. The court also limited judicial notice of certain government reports to existence only and declined to judicially notice PointClickCare promotional materials for truth.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether action is barred by government‑action or public‑disclosure bars (prior Denk) | Relators: their scheme (altering valid prescriptions after receipt) is different and not based on public Denk disclosures; they are original source of their audit findings | PharMerica: Denk (gov’t intervened) disclosed substantially the same fraud (dispensing without valid prescriptions), so Relators’ suit is parasitic or publicly disclosed | Court: Bars do not apply; Denk alleged different modes (no‑prescription, narcotics box, emergency); Relators allege a distinct, more‑sophisticated alteration scheme — not substantially the same |
| Sufficiency of pleading for FCA §§ 3729(a)(1)(A),(B) (prescription alterations; Rule 9(b)) | Relators: plead scheme details (mechanics of LTC400, time period, audit counts, sample RX numbers) and reliable indicia supporting inference that false claims were submitted | PharMerica: complaint lacks particularity, fails to identify specific claims, misunderstands pharmacy law re: non‑controlled substitutions, industry regulation makes large‑scale fraud implausible | Court: Pleading adequate under Twombly/Foglia/Zwirn; Relators pleaded scheme particulars + indicia (counts, timeframe, examples). Non‑controlled, controlled, and brand/generic substitution claims may proceed |
| Reverse‑false‑claims (§ 3729(a)(1)(G)) based on CIA stipulated penalties | Relators: CIA breach created an obligation to pay penalties; concealing breach triggers reverse‑false‑claims liability | PharMerica: CIA penalties are contingent on OIG discretion and therefore not an "established" obligation; claim is speculative or duplicative | Court: Dismissed CIA‑based § 3729(a)(1)(G) claims — stipulated penalties conditioned on OIG discretion are not an "established duty" at time of misconduct; claim for simple retention of fraudulently obtained payments also dismissed as duplicative of (A)/(B) claims |
| Retaliation under 31 U.S.C. § 3730(h) (Sturgeon) | Sturgeon: internal investigation and repeated reporting to management were protected conduct; diminution of duties was retaliatory | PharMerica: allegations describe ordinary workplace disputes; prior employment jury verdict precludes (collateral estoppel) | Court: Retaliation claim adequately pled (protected conduct + adverse actions). Collateral estoppel fails because jury question in prior case asked only whether resignation was for "good reason," not whether duties were diminished and that issue was not essential to verdict |
Key Cases Cited
- Victaulic Co. v. Tieman, 499 F.3d 227 (3d Cir. 2007) (caution against judicial notice of internet/promotional materials at pleading stage)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (plausibility standard for Rule 12(b)(6))
- Foglia v. Renal Ventures Mgmt., LLC, 754 F.3d 153 (3d Cir. 2014) (heightened Rule 9(b) approach in FCA cases: plead scheme particulars plus reliable indicia of claims)
- Zizic v. Q2Administrators, LLC, 728 F.3d 228 (3d Cir. 2013) (public‑disclosure bar requires particularized, claim‑by‑claim substantial‑similarity analysis)
- United States ex rel. Silver v. Omnicare, Inc., 903 F.3d 78 (3d Cir. 2018) (interpreting the public‑disclosure bar’s "substantially the same" language)
- United States ex rel. Petras v. Simparel, Inc., 857 F.3d 497 (3d Cir. 2017) (reverse‑false‑claims "obligation" must be "established" at time of misconduct)
- Schindler Elevator Corp. v. United States ex rel. Kirk, 563 U.S. 401 (2011) (describing FCA’s balance between encouraging whistleblowers and avoiding parasitic suits)