United States Ex Rel. Grenadyor v. Ukrainian Village Pharmacy, Inc.
772 F.3d 1102
7th Cir.2014Background
- Relator Yury Grenadyor, a pharmacist formerly at Ukrainian Village Pharmacy, sued under the False Claims Act (FCA) alleging kickbacks (copay waivers and gifts), billing for undelivered drugs, and employer retaliation; district court dismissed with prejudice.
- Alleged scheme: pharmacy waived copays and provided recurring gift packages (e.g., tins of “caviar,” other food items, TV guides) to induce prescription fills and billed Medicare/Medicaid for the resulting claims.
- Alleged separate fraud: pharmacy submitted refill requests and billed for drugs that patients never received and failed to reverse charges.
- Procedural posture: dismissal for failure to plead fraud with particularity under Rule 9(b); relator amended complaint but failed to cure deficiencies; district court denied further amendment and dismissed kickback and fraud claims with prejudice but dismissed retaliation claim as well (later reversed on appeal).
- Key evidentiary deficiencies found by the court: lack of particularized allegations that (1) the enrollment certification was false when made; (2) specific Medicare/Medicaid patients received kickbacks tied to billed claims; (3) any individual received over $50 in gifts in a year or non–dual-eligible waivers; (4) sufficient, corroborated facts showing intentional failure to reverse undelivered-drug charges across multiple states.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether signing Medicare enrollment form stating compliance can be a false claim when defendant later gave kickbacks | Grenadyor: enrollment "I agree" was false when signed (pharmacy intended to give kickbacks) so claims were false | Defendants: statement was a promise; breach later does not make the enrollment statement false at signing | Court: promise can be a false statement but complaint lacked particularized facts showing intent to violate at time of signing; 9(b) not satisfied |
| Whether implied-certification theory supports FCA claim for kickbacks without proof of intent at enrollment | Grenadyor: each claim impliedly certified legality; if pharmacy gave kickbacks, claims were false | Defendants: alleged regulatory violations alone don't convert claims into false claims absent specific tying of kickbacks to billed patients | Court: implied-certification theory recognized but complaint failed Rule 9(b) — did not identify billed Medicare/Medicaid patients who received impermissible kickbacks or show waivers/adverts/non–dual-eligible recipients |
| Whether allegations that pharmacy billed for drugs never received stated an FCA claim | Grenadyor: pharmacy billed Medicare/Medicaid for refills patients never picked up and failed to reverse, so knowingly false claims were presented | Defendants: isolated incidents or failures to reverse are not pleaded with requisite particularity or showing of fraudulent intent | Court: complaint pleaded two instances of undelivered drugs but lacked specifics on timing, source of knowledge, and intent to defraud; 9(b) not satisfied |
| Whether relator stated a retaliation claim under 31 U.S.C. § 3730(h) | Grenadyor: fired for complaining internally about unlawful kickbacks and billing practices | Defendants: employer conduct not actionable (or insufficient nexus) | Court: remanded on retaliation — prior precedent permits internal complaints to support FCA retaliation claim; dismissal as to retaliation reversed and remanded |
Key Cases Cited
- United States ex rel. Gross v. AIDS Research Alliance-Chicago, 415 F.3d 601 (7th Cir.) (knowledge requirement under FCA)
- The Wharf (Holdings) Ltd. v. United Int’l Holdings, Inc., 532 U.S. 588 (U.S.) (making a false promise can be fraudulent)
- United States ex rel. Main v. Oakland City University, 426 F.3d 914 (7th Cir.) (false promises can support FCA liability)
- United States ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295 (3d Cir.) (discussion of implied-certification theory)
- United States ex rel. Absher v. Momence Meadows Nursing Ctr., Inc., 764 F.3d 699 (7th Cir.) (treatment of implied-certification as unsettled in this circuit)
- United States ex rel. Bledsoe v. Community Health Sys., Inc., 501 F.3d 493 (6th Cir.) (need to tie specific claims to fraudulent conduct under Rule 9(b))
- United States ex rel. Clausen v. Laboratory Corp. of Am., 290 F.3d 1301 (11th Cir.) (Rule 9(b) particulars required in FCA cases)
- Fanslow v. Chicago Mfg. Ctr., Inc., 384 F.3d 469 (7th Cir.) (internal complaints can support FCA retaliation claims)
- Pirelli Armstrong Tire Corp. Retiree Med. Benefits Trust v. Walgreen Co., 631 F.3d 436 (7th Cir.) (limits on pleading on information and belief in fraud cases)
- Bank of America, N.A. v. Knight, 725 F.3d 815 (7th Cir.) (standards and discretion for granting leave to amend)