73 F. Supp. 3d 1002
S.D. Ill.2015Background
- Relator James Garbe, a former Kmart pharmacist, brought a qui tam FCA action alleging Kmart reported inflated "usual and customary" (U&C) prices for certain generic drugs, causing overpayments by Medicare Part D, Medicaid, Tricare, and other payers. The government declined to intervene.
- Kmart operated tiered generic-discount programs (KMP, RMP, Generics Plus, later PSC) with enrollment requirements; dispute exists whether those programs were limited to 90‑day supplies and whether enrollment removed customers from the "general public."
- The technical claims-adjudication chain: pharmacy → PBM/switch vendor → Plan Sponsor → CMS (PDEs submitted by Plan Sponsors do not include the pharmacy U&C field). Relator contends inflated U&C values were passed through this chain and caused overpayments.
- Central legal dispute centers on the definition of U&C (industry/NCPDP definition = "cash price to general public" vs. payer-specific statutory/contract definitions) and whether Kmart’s discount-enrollment customers fall outside the "general public."
- Kmart moved for multiple partial summary judgments (U&C definition, 90‑day quantity limitation, pre-FERA Medicare Part D presentment/materiality, all Part D claims) and to exclude Relator’s expert Dale Chamberlain. Court granted in part and denied in part: it declared the legal rule on U&C, denied exclusion of Chamberlain, and denied the other summary judgment motions; it certified three interlocutory questions for appeal and stayed the case.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of U&C price | U&C means the NCPDP/industry standard: the cash price charged to the general public. | U&C is defined by individual payer statutes, regulations, payer‑sheets, or contracts; NCPDP is non‑mandatory guidance. | Court: NCPDP/industry definition (cash price to general public) controls unless a payer-specific statute/contract defines U&C differently. |
| Effect of program enrollment on "general public" status | Enrollment was open and minimal; discount enrollees are part of the general public, so discounts must be included in U&C. | Enrollment (forms, fee) made enrollees a private group/club, excluding them from "general public." | Court: Kmart’s programs were open and non‑selective; enrollment did not per se exclude participants from the "general public" (but payer‑specific definitions may differ). |
| 90‑day quantity limitation | Relator: KMP/RMP discounts were routinely prorated/overridden for 30/60 day supplies so non‑90 day claims can reflect U&C. | Kmart: KMP/RMP were strictly 90‑day programs; non‑90 claims fall outside program and cannot define U&C. | Court: Genuine dispute of material fact exists (transaction data and expert disagreement); summary judgment denied. |
| Medicare Part D presentment & materiality (pre‑ and post‑FERA issues) | Relator: False U&C submissions to PBMs/Plan Sponsors were presented to government agents and were material because they caused overpayments to Kmart. | Kmart: CMS was insulated by Part D structure; Plan Sponsors/PBMs not government officers for FCA presentment; PDEs do not include U&C so not material. | Court: PBMs/Plan Sponsors are agents/officers for FCA presentment in Part D; Relator met materiality by showing government funds were diverted; summary judgment denied. Court applied pre‑ and post‑FERA provisions as appropriate (post‑FERA §3729(a)(2) applied retroactively). |
| Exclusion of expert (Dale Chamberlain) | Chamberlain’s testimony is necessary to explain complex adjudication and NCPDP standards; he is qualified. | Kmart: Testimony is legal conclusion, duplicative, or obvious to jury. | Court: Denied exclusion; Chamberlain admissible to explain technical adjudication and standards (legal conclusion issue moot since court resolved definition question). |
Key Cases Cited
- Anderson v. Liberty Lobby, 477 U.S. 242 (summary judgment standard)
- Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (197"u" standard for expert admissibility)
- Albiero v. City of Kankakee, 246 F.3d 927 (7th Cir. 2001) (summary judgment standards in Seventh Circuit)
- Bodimetric Health Servs., Inc. v. Aetna Life & Cas., 903 F.2d 480 (7th Cir. 1990) (private intermediaries as agents for government functions)
- Good Shepherd Manor Found., Inc. v. City of Momence, 323 F.3d 557 (7th Cir. 2003) (expert testimony cannot state legal conclusions)
- United States ex rel. Crews v. NCS Healthcare of Ill., Inc., 460 F.3d 853 (7th Cir. 2006) (elements of §3729(a)(2) pre‑FERA)
- United States v. Rogan, 517 F.3d 449 (7th Cir. 2008) (materiality under FCA)
- Yannacopoulos v. General Dynamics, 652 F.3d 818 (7th Cir. 2011) (FERA amendment application discussion)
- Longhi v. United States, 575 F.3d 458 (5th Cir. 2009) (materiality interpretation under FCA)