894 F. Supp. 2d 584
E.D. Pa.2012Background
- Relator Streck brings a qui tam FCA action against multiple pharmaceutical manufacturers alleging misreporting AMP to reduce Medicaid rebates.
- The 2007 Deficit Reduction Act and later CMS guidance altered the statutory/regulatory AMP definition, excluding prompt pay discounts and bona fide service fees from AMP.
- Plaintiff alleges two schemes: (1) Discount Defendants reclassified bona fide service fees as discounts to lower AMP; (2) Service Fee Defendants used price credits/retroactive adjustments to suppress AMP.
- The Fourth Amended Complaint includes contracts with wholesalers detailing services and purported discounts, and asserts knowledge or recklessness about these classifications.
- Court granted in part and denied in part Defendants’ motion to dismiss, separating claims by Defendants type and by time period (pre- and post-2007).
- Court dismissed some state-law and pre-2007 AMP submissions; allowed post-2007 submissions against Discount Defendants and certain state-law claims to proceed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Rule 8(a) pleading sufficiency for FCA claims | Streck pleads plausible recklessness and misclassification under 8(a). | Plaintiffs lack facts showing required scienter; reliance on good faith interpretations. | Partially denied: pre-2007 claims lack plausibility; post-2007 claims against Discount Defendants survive. |
| Rule 9(b) particularity for FCA fraud | Plaintiff provides contracts and regulatory references; sufficient detail. | Plaintiff omits specific false claims and precise calculations. | Plaintiff 9(b) claim satisfied for particularity given contract-level details and disclosure duties. |
| Whether Discount Defendants’ AMP interpretation was reckless post-2007 | Post-2007 guidance and four-prong bona fide service fee test render their classification reckless. | Interpreting service fees as discounts was reasonable given prior ambiguity. | Plaintiff plausibly alleges recklessness post-2007 for Discount Defendants. |
| Whether Service Fee Defendants’ price credits were properly excluded | Retroactive credits should be included; they affect price paid to manufacturer. | Credits reflect service fees and fit within bona fide service fee framework; guidance lacking until 2012. | Claims against Service Fee Defendants dismissed; insufficient post-2007 guidance to allege recklessness. |
| State-law FCA claims viability and retroactivity | Some states amended laws to allow relators without intervention; earlier provisions apply retroactively | Older statutes require intervention or written determinations; many states not retroactive. | Most state-law claims dismissed for pre-effective-date submissions; post-date claims may proceed where allowed. |
Key Cases Cited
- Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (U.S. 2007) (recklessness standard for statutory intent under FCA comparable to Safeco)
- K & R L.P. v. Mass. Hous. Fin. Agency, 530 F.3d 980 (D.C.Cir. 2008) (applies Safeco recklessness standard to FCA context)
- Twombly, 550 U.S. 544 (U.S. 2007) (facial plausibility standard for pleading claims)
- Iqbal, 556 U.S. 662 (U.S. 2009) (clarifies plausibility requirement after Twombly)
- Wilkins v. United Health Grp., Inc., 659 F.3d 295 (3d Cir. 2011) (pleading FCA claims with required scienter and particularity)