United States Ex Rel. Winkelman v. CVS Caremark Corp.
2016 U.S. App. LEXIS 12108
| 1st Cir. | 2016Background
- Relators Myron Winkelman and Stephani Martinsen filed a qui tam False Claims Act (FCA) suit alleging CVS Caremark used its Health Savings Pass (HSP) pricing to avoid reporting lower usual-and-customary (U&C) prices to Medicare Part D and state Medicaid programs, causing government overpayments.
- HSP: consumers paid a small fee to buy many generic 90-day prescriptions at deeply discounted prices (e.g., $9.99), which relators say reflected CVS's true U&C prices.
- Prior public disclosures: a February 2010 Change to Win report and substantial media coverage, plus a Connecticut AG press release, subpoena, and legislative response, publicly criticized CVS for refusing to apply HSP prices to Connecticut Medicaid. Congressional/CRS materials also discussed the issue.
- The relators filed suit in August 2011; it remained sealed during intervention consideration; the government and states declined to intervene and the suit was unsealed in 2014. CVS moved to dismiss under the FCA public-disclosure bar.
- District court dismissed, holding earlier public disclosures revealed essentially the same scheme; First Circuit affirmed, finding the public-disclosure bar applicable and relators not original sources.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does public disclosure bar preclude the FCA suit? | Winkelman/Martinsen: prior publicity did not disclose the fraud alleged; suit raises novel, broader allegations (other states, Medicare Part D). | CVS: Change to Win, Connecticut AG publicity, media, CRS and congressional materials publicly disclosed the essential elements of the alleged scheme. | Held: Public disclosure occurred and disclosed substantially the same allegations/transactions; bar applies. |
| Scope of record and standard on dismissal (jurisdictional v. merits) | Relators: post‑PPACA statutory change makes the bar nonjurisdictional — thus factual materials outside pleadings cannot be considered on Rule 12(b)(6). | CVS: court may consider public records and judicially noticeable materials; dismissal appropriate on the record. | Held: Court assumed, favorably to relators, some extra declarations but relied on publicly noticed materials; disposition affirmed without resolving whether the bar is jurisdictional. |
| Whether relators' complaint differs materially from public disclosures (substantial similarity) | Relators: complaint adds program breadth (Medicare Part D, other states) and more detailed allegations, so it is not substantially the same. | CVS: Connecticut disclosures plainly revealed HSP, CVS's refusal to give Medicaid HSP prices, and state's belief that CVS was required to do so; details in complaint only add color. | Held: Complaint alleges substantially the same scheme; additional program/state labels do not avoid the bar. |
| Whether relators qualify as "original sources" under 31 U.S.C. § 3730(e)(4)(B) | Relators: they provided independent, specific information (audits, examples, insider pharmacy testimony) that materially adds to public disclosures. | CVS: relators' details and examples do not materially add to publicly disclosed elements; public record already showed deliberate conduct and intent. | Held: Relators do not materially add to public disclosures and thus are not original sources; exception does not apply. |
Key Cases Cited
- Rockwell Int'l Corp. v. United States, 549 U.S. 457 (Sup. Ct.) (discussing jurisdictional effect of statutory language)
- Ondis v. City of Woonsocket, 587 F.3d 49 (1st Cir. 2009) (public-disclosure bar requires public disclosure of material elements)
- Poteet v. Bahler Med., Inc., 619 F.3d 104 (1st Cir. 2010) (public disclosure can be decided on Rule 12 motions; substantial similarity test)
- In re Colonial Mortg. Bankers Corp., 324 F.3d 12 (1st Cir. 2003) (courts may consider public records and matters subject to judicial notice on Rule 12(b)(6))
- United States ex rel. Osheroff v. Humana, Inc., 776 F.3d 805 (11th Cir. 2015) (treating the PPACA-amended public-disclosure bar as nonjurisdictional)
- Advocates for Basic Legal Equal., Inc. v. U.S. Bank, 816 F.3d 428 (6th Cir. 2016) (public disclosure need not use the word "fraud"; detailed public facts can suffice)
- Cause of Action v. Chicago Transit Auth., 815 F.3d 267 (7th Cir. 2016) (original-source "materially adds" inquiry and overlap with public-disclosure analysis)