U.S. ex rel. Azam Rahimi v. Rite Aid Corp.
3f4th813
| 6th Cir. | 2021Background
- Rite Aid operated an Rx Savings Program that offered lower cash prices to members but explicitly excluded prescriptions paid in whole or part by Medicare Part D, state Medicaid, or TRICARE; federal rules require pharmacies to bill those programs at their “usual and customary” (U&C) charge to the general public.
- Relator Azam Rahimi, a pharmacist, learned (via a former classmate, “John Doe,” and Doe’s cousin) that some Rite Aid stores charged Medicaid/other beneficiaries higher prices than Rx Savings members and investigated by calling Rite Aid pharmacies in multiple states and collecting receipts.
- Before Rahimi’s qui tam disclosure (May 2, 2011), several public sources reported similar concerns: Rite Aid’s own advertisements excluded public plans; Connecticut’s Attorney General publicized an investigation and press release after Rite Aid raised Rx Savings prices in Connecticut following a statutory change; the HHS OIG announced reviews of large chains’ Medicaid billing; and a nearly identical qui tam against Kmart was unsealed.
- Rahimi filed an FCA suit (May 3, 2011) and disclosed his information to the government. The government declined intervention years later; Rite Aid moved for judgment on the pleadings invoking the FCA public-disclosure bar.
- The district court dismissed the federal FCA claim under the public-disclosure bar and declined supplemental jurisdiction over state-law claims; the Sixth Circuit affirmed, holding the public disclosures put the government on notice and that Rahimi was not an original source under either the pre-2010 or post-2010 standards.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether pre-suit public materials (e.g., Connecticut AG publicity and media coverage) publicly disclosed the fraud such that the FCA public-disclosure bar applies | Rahimi: Connecticut publicity only concerned Rite Aid’s pretext for raising Rx Savings prices in CT and did not disclose billing fraud or the essential elements of his multi-state, multi-program FCA claim | Rite Aid: The Connecticut publicity, national news coverage, HHS OIG announcements, and a similar qui tam revealed the essential elements of the alleged scheme (U&C not reflecting discount programs) | Held: The Connecticut publicity and related public materials sufficiently disclosed facts from which the alleged fraud could be inferred; public-disclosure bar applies |
| Whether the public disclosures are sufficiently related (substantial identity / substantially the same) to Rahimi’s complaint covering multiple states and programs | Rahimi: The publicity was limited to Connecticut Medicaid and did not mention Medicare Part D or TRICARE or other states; expanding the claim nationwide is not the same allegation | Rite Aid: Once the scheme was publicly revealed in CT, alleging the same scheme elsewhere merely adds predictable details and does not evade the bar | Held: The court followed Holloway/Winkelman reasoning: additional programs/states are details; allegations are substantially the same and barred |
| Whether Rahimi is an "original source" under the pre-2010 (1986) version of § 3730(e)(4) (direct and independent knowledge; requirement to have provided information to the government before public disclosure) | Rahimi: He had direct knowledge from his investigation and from John Doe and voluntarily disclosed to the government before filing | Rite Aid: Rahimi’s information was largely second-hand (from Doe) and his calls only provided pricing quotes, not evidence of claims submitted to government; he did not qualify as an original source | Held: Although the court rejected the Sixth Circuit’s earlier rule requiring pre-disclosure to government (McKenzie) as inconsistent with Rockwell, it held Rahimi nonetheless lacked direct and independent knowledge and so was not an original source under the pre-2010 test |
| Whether Rahimi is an "original source" under the post-2010 § 3730(e)(4) (knowledge independent of and materially adding to public disclosures) | Rahimi: His state-specific examples and pricing inquiries materially added to public disclosures and showed U&C pricing problems across programs/states | Rite Aid: Rahimi only supplied additional instances and details; he did not materially add information that would change government decision-making | Held: Rahimi did not materially add information beyond public disclosures and thus failed the post-2010 original-source exception |
| Whether the district court abused discretion by declining supplemental jurisdiction over remaining state-law claims | Rahimi: Court should have kept state claims for judicial economy given the long pendency | Rite Aid: Federal claim dismissal counseled dismissal of supplemental state claims; novel state-law questions and limited discovery weighed against retention | Held: No abuse of discretion; dismissal of state claims was permissible given unresolved federal claims and novel state-law issues |
Key Cases Cited
- Rockwell Int’l Corp. v. United States, 549 U.S. 457 (U.S. 2007) (interpreting original-source exception to refer to information underlying relator’s allegations rather than information underlying public disclosure)
- United States ex rel. Winkelman v. CVS Caremark Corp., 827 F.3d 201 (1st Cir. 2016) (Connecticut publicity publicly disclosed a pharmacy chain’s failure to apply membership discount price as U&C to Medicaid)
- United States ex rel. Holloway v. Heartland Hospice, Inc., 960 F.3d 836 (6th Cir. 2020) (three-part public-disclosure test; relator adding details to a publicly revealed scheme barred)
- Maur v. Hage-Korban, 981 F.3d 516 (6th Cir. 2020) (public-disclosure framework and original-source principles)
- Poteet v. Medtronic, Inc., 552 F.3d 503 (6th Cir. 2009) (public-disclosure bar background and standards)
- United States v. McKenzie (McKenzie v. BellSouth Telecomm.), 123 F.3d 935 (6th Cir. 1997) (earlier Sixth Circuit rule on original-source timing, later revisited)
- Antoon v. Cleveland Clinic Found., 788 F.3d 605 (6th Cir. 2015) (original-source direct and independent knowledge analysis)
- Advocates for Basic Legal Equal., Inc. v. U.S. Bank, N.A., 816 F.3d 428 (6th Cir. 2016) (material-addition standard for post-2010 original-source exception)
- Schindler Elevator Corp. v. United States ex rel. Kirk, 563 U.S. 401 (U.S. 2011) (overview of qui tam structure and incentives under the FCA)
- United States ex rel. Garbe v. Kmart Corp., 824 F.3d 632 (7th Cir. 2016) (explaining U&C concept and pharmacy billing issues)