382 F.3d 432 | 3rd Cir. | 2004
(A WHOLLY-OWNED SUBSIDIARY Circuit Judges
OF OMNICARE, INC.); ALAN TRASTER, INDIVIDUALLY AND IN HIS CAPACITIES (Opinion filed : September 1, 2004)
AS AN OFFICER OF OMNICARE,
INC. AND POMPTON Harvey S. Mars, Esquire (Argued) NURSING HOME SUPPLIERS AND Leibowitz & Mars 322 West 48 th Street VARIOUS JOHN DOE COMPANIES WHO PROCESS New York, NY 10036
MEDICATIONS RETURNED FROM
PATIENTS AT LONG-TERM CARE Counsel for Appellant
FACILITIES LOCATED IN
THE STATE OF NEW JERSEY Harry R. Silver, Esquire (Argued) PURSUANT TO THEIR Patton Boggs CONTRACTUAL 2550 M. Street, N.W. RELATIONS WITH NEW JERSEY Washington, D.C. 20037
MEDICAID/PAAD PROGRAMS;
CHERRY HILL PHARMACY, LTC, James A. Robertson, Esquire (A WHOLLY-OWNED SUBSIDIARY Kalison, McBride, Jackson & Murphy 645 Martinsville Road bases his allegations on the fact that P.O. Box 814 Medicaid pays for medications that the Liberty Corner, NJ 07938 defendant phar mac ies dispense to
Medicaid beneficiaries but, if a medication Peter S. Pearlman, Esquire is subsequently returned to a defendant Jessica V. Henry, Esquire pharmacy for resale, the pharmacy credits Cohn, Lifland, Pearlman, Herrmann & Medicaid with only 50% of what Medicaid Knopf had paid the pharmacy for the medication. Park 80 Plaza West - One We find that the lack of legal authority, Saddle Brook, NJ 07663 requiring Medicaid-provider pharmacies to
credit Medicaid when a medication is E. John Steren, Esquire returned for resale, is disturbing. We Ober, Kaler, Grimes and Shriver conclude, however, that there can be no 1401 H. Street, N.W. FCA liability in the absence of such Suite 500 authority. In addition, Quinn’s failure to Washington, D.C. 20005 present evidence of the actual submission
of a single false claim to Medicaid is fatal Counsel for Appellees to this qui tam action.
I. FACTUAL BACKGROUND
Pompton is a Medicaid-provider O P I N I O N OF THE COURT pharmacy that provides medications to individuals residing in long-term care facilities. Long-term care facilities, which
ROTH , Circuit Judge: include nursing homes, provide care to Omnicare, Inc., a Medicaid- patients who participate in medical provider pharmacy, and various of its insurance programs, including Medicaid. subsidiaries, including Pompton Nursing Home Suppliers (Pompton), were charged by Thomas Quinn with submitting false
Pharmacy are also subsidiaries of claims in violation of the False Claims Act Omnicare. The District Court, in (FCA), 31 U.S.C. § 3729 et seq . [1] Quinn analyzing Quinn’s claims, focused solely on Pompton’s recycling and crediting practices because Quinn worked at [1] The complaint also named Alan Pompton and did not advance a theory of Traster; Bach’s Pharmacy, East; Cherry FCA liability against any other Omnicare Hill Pharmacy and Winslow’s Pharmacy subsidiary that was not advanced against as defendants. Pompton and Bach’s Pompton. For the same reason, we too Pharmacy, East are the same entities. will focus solely on Pompton’s recycling Cherry Hill Pharmacy and W inslow’s and crediting practices. Approximately sixty percent of the of the net amount payable medications that Pompton dispenses are under this claim has been paid for by New Jersey Medicaid. [2] The paid; and that payment of remainder are paid for by the patients such a m ou n t w ill be themselves or by private insurers. After a accepted as payment in full Medicaid-provider pharmacy has supplied without additional charge to a medication to a Medicaid patient, the the patient or to others on pharmacy submits a claim to Medicaid. his behalf . . .. I understand Medicaid then pays the pharmacy for the that . . . any false claims, medication. Instructions for filing statements or documents, or Medicaid claims are set forth in New concealment of a material Jersey Medicaid’s Pharmacy Services fact, may be prosecuted Fiscal Agent Billing Supplement (FABS). under applicable federal or FABS instructs provider pharmacies to State law, or both. submit Medicaid pharmacy claims on the O n s o m e o c c a sions, th e MC-6 form. The MC-6 claim form medications, for which Pompton has contains a “Provider Certification” which submitted a claim and received full the provider must sign: reimbursement from Medicaid, are returned. [4]
I certify that the services New Jersey pharmacy covered by this claim were regulations allow Medicaid provider personally rendered by me pharmacies to recycle returned unit dose o r u n d e r m y d i r e ct packaged medications if they have been supervision . . . and that the stored properly and the seal and control services covered by this number remain intact. See N.J.A.C. § 13:39-9.15. [5] When Pompton receives claim and the amount charged thereof are in returned medications for recycling, it is a c c o r d a n c e w i t h t h e Pompton’s practice to send Medicaid a regulations of the New Jersey Health Services Program [3] ; and that no part A NN . § 30:4D-3. [4] A change in the patient’s
check for 50% of the cost of the returned concerns in a memo to Traster. Quinn was medications. [6] Pompton justifies retaining
dismissed by Pompton a few days later on the other 50% to cover the expense of August 22, 1997. restocking an d r e d i sp e n sing th e medications. II. PROCEDURAL HISTORY
The qui tam plaintiff, Thomas Quinn filed a complaint under seal Q u i n n , was P o m p t o n ’ s r e g io n a l comptroller. Quinn alleges that it was against Pompton in the United States Pompton’s practice, when medications District Court for the District of New Jersey. Quinn brought the action under the were returned, to push out the individual tablets and capsules from their sealed qui tam provisions of the False Claims Act, 31 U.S.C. § 3729 et seq ., [7] under New packages and place them in separate Je rse y’ s Co nscien tiou s E m pl oye e containers for subsequent use. Quinn claims that he observed workers in the Protection Act (CEPA), N.J.S.A. § 34:19- return department removing pills from 3, and under New Jersey common law. Quinn claimed that Pompton violated §§ their original sealed containers by pushing them through their packaging and that he 3729(a)(1), (2), and (7) of the FCA saw the workers create new packages for because it (1) failed “to submit adjustments in order to partially void the pills by re-sealing the packages with irons. Quinn asserts that Pompton claims (submitted on required MC-6 claim forms) where the medications supplied eventually redispensed the returned medications. pursuant to those claims were ultimately
After Quinn learned that another returned,” (2) sold “Medicaid the same medication twice,” (3) sub mitted recently acquired Omnicare subsidiary in Illinois had settled FCA claims because it “Medicaid claims for pharmaceuticals that had represented to Medicaid that medications were destroyed when they in fact had been returned and redispensed, he [7] The FCA allows a private citizen, became concerned about Pompton’s called a relator, to bring an action in the Medicaid recycling and crediting practices. name of the United States, and the He expressed his concern to Alan Traster, government may intervene if it so the president of Pompton, who told Quinn chooses. See 31 U.S.C. §§ 3730(b)(1), that Pompton was not required to credit (2). In this case, the government did not New Jersey Medicaid for returned intervene. The FCA permits the relator medications. Quinn memorialized his to bring the action in the absence of the government’s intervention. Quinn is entitled to collect at least 25 percent but [6] Pompton “inadvertently” credited not more than 30 percent of the proceeds New Jersey Medicaid only 25% between of the action or settlement. See id . §§ November 1996 and September 1997. 3730(b)(4)(B), (d)(2). were removed from unit dose packaging in 2003). A district court may grant summary the recycling process, in violation of New judgment when there is no genuine issue Jersey Board of Pharmacy Regulations”, of material fact and the moving party is and (4) returned “credits to Medicaid for entitled to judgment as a matter of law. less than 100% of the amount initially Fed. R. Civ. P. 56(c). The moving party claimed for returned medications.” United bears the burden to show an absence of States ex rel. Quinn v. Omnicare, Inc. , No. any genuine issues of material fact. 98-2031 (DRD), slip op. at 9-10 (D.N.J. “[I]nferences to be drawn from the filed March 28, 2003). Quinn claimed that underlying facts contained in the evidential his dismissal violated the anti-retaliation sources . . . must be viewed in the light provisions of the FCA and CEPA. Quinn most favorable” to the non-moving party. also brought a claim for unjust enrichment. Hollinger v. Wagner Mining Equipment
On cross-motions for summary Co. , 667 F.2d 402, 405 (3d Cir. 1981). judgment, the District Court granted “[I]f a disputed fact exists which might summary judgment to Pompton on Quinn’s affect the outcome of the suit under the FCA claims and his unjust enrichment controlling substantive law,” summary claim. The court declined to exercise judgment is not appropriate. Belitskus , supplemental jurisdiction over Quinn’s 343 F.3d at 639 (citation omitted). Any CEPA claim and dismissed it for lack of doubt a court has about the existence of a subject matter jurisdiction. genuine issue of material fact should be
Quinn appeals the adverse resolved in the non-moving party’s favor. disposition of his FCA claims. [8] Continental Ins. Co. v. Bodie , 682 F.2d 436, 438 (3d Cir. 1982). Summary III. JURISDICTION AND judgment is appropriate when there is no STANDARD OF REVIEW genuine issue of material fact to be
resolved at trial. Gruenke v. Seip , 225 The District Court had jurisdiction F.3d 290, 298 (3d Cir. 2000). pursuant to 28 U.S.C. § 1331 and 31 U.S.C. § 3732(a). We have appellate IV. DISCUSSION jurisdiction pursuant to 28 U.S.C. § 1291. A. The Submission of the Initial
We exercise plenary review over Medicaid Claim the District Court’s decision granting The FCA imposes liability on any summary judgment and will use the same test applied below. Belitskus v. person who Pizzingrilli , 343 F.3d 632, 639 (3d Cir.
(1) knowingly presents, or causes to be presented, to an officer or employee of the [8] Quinn does not appeal the District United States Government . Court’s entry of summary judgment on . . a false or fraudulent claim his FCA retaliation claim. for payment or approval; payment by a private insurance company after Medicaid has paid for the medication, (2) knowingly makes, uses, a billing error, or a computer error in or causes to be made or processing the claim. A claim is “paid in used, a false record or error” when it is paid and it should not statement to get a false or have been paid. See N.J.A.C. § 10:49- fraudulent claim paid or 8.3(b). In addition, N.J.A.C. §10:51- a p p r o v e d b y t h e 1.25(j)(2) requires “[p]harmacies . . . to Government . . .. initiate claim reversal for those services in
which a claim was generated and 31 U.S.C. §§ 3729(a)(1), (2). A person adjudicated to payment . . . and the service acts “knowingly” when he “(1) has actual was not subsequently provided to a . . . knowledge of the information; (2) acts in beneficiary.” deliberate ignorance of the truth or falsity FABS instructs the pharmacy to fill of the information; or (3) acts in reckless out an “Adjustment Request” form when a disregard of the truth or falsity of the claim is underpaid, overpaid, or paid in information, and no proof of specific error. In the case of a claim that is paid in intent to defraud is required.” 31 U.S.C. § error, the pharmacy voids the entire claim 3729(b). and Medicaid deducts the voided amount
Each time Pompton submits a claim from the next payment. The provider for payment on the MC-6 form, it certifies indicates on the “Adjustment Request” that “the services covered by this claim form the reason for the adjustment or void. were . . . rendered . . . and . . . the services One of the reasons listed is “service not covered by this claim and the amount provided.” None of these regulations, charged thereof are in accordance with . . however, instruct pharmacies on how to . [Medicaid] regulations . . ..” Quinn credit or adjust a claim for medications alleges that Pompton’s initial claims are after those medications have been returned false due to its failure to adjust them when for recycling. medications are returned for recycling. Nevertheless, Quinn contends that
There are several regulatory Pompton violates §§ 3729(a)(1) and (2) of provisions which do require the voiding or the FCA by failing to void or adjust claims adjustment of claims under certain for medications after these medications circumstances. Section 10:49-8.3 of the have been returned for redispensing. New Jersey Administrative Code requires Quinn argues that the initial claims “[a]djustments following payment of become false when medications have been claims” when “a claim is incorrectly paid returned because the claims then become and the provider receives an overpayment claims for services that were not provided or underpayment” or when a claim is “paid to the intended beneficiaries. Quinn in error.” Situations that may cause asserts that, after the return of the underpayment or overpayment include a medications, unless Pompton reverses the under the FCA. [9] The only question is claims as required by N.J.A.C. § 10:51- 1.25, the certification on the initial MC-6 whether a claim, which is not “false” or form is a false one. “fraudulent” when initially submitted, can
The District Court rejected Quinn’s later be rendered so if the medication is argument because there is no language in returned. the MC-6 form, its instructions, or There is FCA liability when a Medicaid regulations that states that “provider knowingly asks the Government medications cannot be returned. Quinn , to pay amounts it does not owe.” United slip op. at 11. The court noted that, even States ex rel. Clausen v. Lab. Corp. of
America , 290 F.3d 1301, 1311 (11 th Cir. though N.J.A.C. § 10:51-1.25(j)(2) requires reversal when “services are not 2002). The FCA reaches “all fraudulent provided,” the regulation does not further attempts to cause the Government to pay state that “services are not provided” when out sums of money.” Harrison v. m e d i c a t i o n s a r e d i sp e n s e d a n d Westinghouse Savannah River , 176 F.3d 776, 788 (4 th Cir. 1999). The terms “false” subsequently returned. Id . at 11-12.
We agree that there is no regulatory and “fraudulent” are not defined in the requirement of the reversal of a claim once FCA. The terms, however, do have a medication has been returned. As the independent meanings: District Court held, if there is no A common definition of requirement to adjust the claim, there is no “fraud” is an intentional liability for a failure to do so.
H o w e v e r , e v e n m o r e fundamentally, Quinn’s allegation is that [9] “Claim” is defined as: the initial claim is rendered false by the [A]ny request or demand, return. The fallacy of this argument lies in whether under contract or the fact that the return of a medication, otherwise, for money or which at the outset has been dispensed to property which is made to a the Medicaid beneficiary, does not render contractor, grantee, or the initial claim false or fraudulent. In other recipient if the order to prove FCA liability under §§ United States Government 3729(a)(1) and (2), Quinn must prove that provides any portion of the “(1) the defendant presented or caused to money or property which is be presented to an agent of the United requested or demanded, or States a claim for payment; (2) the claim if the Government will was false or fraudulent; and (3) the reimburse such contractor, defendant knew the claim was false or grantee, or other recipient fraudulent.” Hutchins v. Wilentz, Goldman for any portion of the & Spitzer , 253 F.3 176, 182 (3d Cir. 2001). money or property which is There is no question that the MC-6 forms requested or demanded. Pompton submits to Medicaid are claims 31 U.S.C. § 3729(c). m i s r e p r e s e n t a t i o n , order to impose FCA liability, it is not c o n c e a l m e n t , o r necessary that the claim have been false nond isclosur e f or th e when it was originally submitted. We purpose of inducing another reject this argument. The FCA aims to in reliance upon it to part impose liability for a broad range of with some valuable thing conduct, including “each and every claim belonging to him or to submitted . . . which was originally surrender a legal right.” obtained by means of false statements or “False” can mean “not true,” other corrupt or fraudulent conduct.” “deceitful,” or “tending to S.Rep.No. 99-345 at 9 (1986), reprinted in mislead.” The juxtaposition 1986 U.S.C.C.A.N. 5266, 5274 (emphasis of the word “false” with the added). Pompton’s claims were not word “fraudulent,” plus the originally false – they did not misrepresent meanings of the words the dispensing of the medication or the comprising the phrase “false cost of what was dispensed. claim,” suggest an improper We conclude that we would be claim is aimed at extracting exceeding the intent of Congress in money the government defining false claims if we were to permit otherwise would not have the transforming of a valid claim into a paid. false claim by the occurrence of a
subsequent fortuitous event which is not Mikes v. Straus , 274 F.3d 687, 695 (2 nd itself the basis of any required adjustment. Cir. 2001) (citations omitted). For the above reasons, we hold that
Under these standards, it is clear Pompton is not liable under the FCA for that, when Pompton submits the initial the submission of the initial Medicaid claim form, it is not intentionally making claims or for the failure to adjust an initial any misrepresentation. To the contrary, it claim when a medication is returned. is merely asking for reimbursement for medication which it has dispensed and for B.The Successive Claim for a Recycled which it is entitled to payment. When Medication Pompton submits the initial claim for In Quinn’s second allegation, he payment, it has no way of knowing if a medication will be returned. Pompton has contends that, when a returned medication not then “knowingly” presented a “false or is resold, Pompton is making a claim for an amount that has, at least in part, already fraudulent claim” at the time of the original claim submission. Nor can the been paid. The MC-6 form requires changed circumstances, caused by the later Pompton to certify that “no part of the net amount payable under this claim has been return of the medication, render the initial claim false or fraudulent. paid.” Quinn asserts that Pompton submits
Quinn contends, however, that, in a false claim to Medicaid when Pompton sells a medication to a Medicaid patient for The District Court held that, without the second time. Quinn alleges that by evidence of the actual submission of a only partially crediting Medicaid for a false claim, there was no genuine issue of returned medication and then submitting a material fact. new claim for the full cost of the same Quinn argues that there is a material medication, Pompton violates §§ question of fact whether Pompton 3739(a)(1) and (2) of the FCA because submitted duplicate Medicaid claims for Pompton has claimed more than the actual the same medication, given that Pompton cost of the medication and has falsely recycles returned medications and represented on the second claim form that approximately 60% of Pompton’s sales are there has been no previous payment for the to Medicaid. Pompton responds that, at medication. the summary judgment stage, Quinn has
The District Court rejected this the “burden to establish, in at least one argument. The court refused to find FCA instance, that a given pharmaceutical had liability under Quinn’s theory that been paid for by Medicaid, returned to the Pompton must have resold returned pharmacy, and then redispensed and medications to Medicaid by virtue of the rebilled to Medicaid.” We agree and large volume of Medicaid business it conclude that Quinn has not met this conducts. Quinn , slip op. at 12. The burden. court, relying on Clausen , 290 F.2d 1311, In Clausen , the court held that a to support the theory that the actual False Claims Act plaintiff cannot “merely submission of a false claim must be . . . describe a private scheme in detail but proved, noted that Quinn did not point to a then . . . allege simply and without any single instance when the same medication stated reason for his belief that claims was in fact the subject of two claims. [10] requesting illegal payments must have
submitted, were likely submitted or should have been submitted to the Government.” 290 F.3d at 1311. Clausen alleged that [10] Quinn asserts that the District Court the defendant medical testing company erred by relying on Clausen . Whereas was overbilling the government by the dismissal in Clausen was pursuant to performing unauthorized, unnecessary, and Federal Rule of Civil Procedure 9(b) for excessive testing. The court affirmed the failure to plead fraud with particularity, dismissal of Clausen’s claim because he Quinn points out that the District Court never provided a single false claim was held that his complaint satisfied Rule actually submitted. Id. at 1312. 9(b)’s requirements. The present case differs from Clausen , however, because Clausen was dismissed on the pleadings for failure to satisfy the pleading step, he then succumbed at the summary requirements of Fed. R. Civ. P. Rule judgment stage for failure to establish a 9(b). While Quinn survived this first necessary element of FCA liability.
Similarly, in United States ex rel. for summary judgment, and Quinn did not Alfatooni v. Kitsap Physicians Service , the ask the District Court for extended Ninth Circuit Court of Appeals held that discovery pursuant to Federal Rule of Civil the plaintiff’s failure to present an actual Procedure 56(f). Quinn failed to link false claim submitted to the government Pompton’s recycling and crediting was fatal to the action. 314 F.3d 995 (9th practices to the actual submission of a Cir. 2002). Alfatooni, relying on the false claim. Without proof of an actual volume of bills submitted to the claim, there is no issue of material fact to Government each year, made the same be decided by a jury. Quinn’s theory that argument Quinn makes here – that false the claims “must have been” submitted claims must have been submitted. The cannot survive a motion for summary court held that an FCA plaintiff must come judgment. to court with a “claim in hand” and Furthermore, we agree with the “generalized, speculative suppositions” District Court that, even assuming that will not suffice. Id. at 1002-03. The court Pompton is submitting successive claims contrasted United States v. Krizek , 192 for the same medications, there can be no F.3d 1024 (D.C.Cir. 1999), in which the FCA liability because New Jersey court “presumed that the defendants would regulations entitle Pompton to recycle and be liable under the False Claims Act for redispense returned medications. Section submitting psychiatric bills that totaled 13:39-9.15(a)(2) of the New Jersey more than twenty four hours for a given Administrative Code, entitled “Disposal of day.” Alfatooni , 314 F.3d at 1003 (citing unused medications,” allows unused unit Krizek , 192 F.3d at 1026-27). The court in dose packaged medication, that “has been Alfatooni noted that in Krizek , “[t]he stored in a medication room or secure area government had the Medicare/Medicaid in the institution . . . [with the] seal and claims in hand ,” id . (citing Krizek , 192 control number . . . intact” to be “recycled F.3d at 1027-28), even though it could not and redispensed.” The regulation does prove exactly which of the “claims in not, however, require pharmacies to credit hand” actually was fraudulent. M edica id for th e “recycled and
The same reasoning applies here. redispensed” medications. Because Pompton admits that approximately 60 Pompton can legally recycle returned percent of its business is Medicaid and that medications, the initial sale and the it accepts returned medications for subsequent sale of a returned medication recycling. However, as Alfatooni failed to are properly viewed as separate do, Quinn also did not come forward with transactions. As the District Court held, a single claim that Pompton actually these transactions are “not duplicative in submitted to Medicaid which covered a any sense that would make them medication for which Pompton had inconsistent with the fu ll-payment previously submitted a claim. Discovery representation on the MC-6.” Quinn , slip was complete at the time Pompton moved op. at 13. Under this separate transaction theory, Pompton does not make a false of compliance with a contract term, representation on the second claim form statute, or regulation – when payment is even though it does not state that Medicaid conditioned on compliance with that has already paid, at least in part, for a requirement. See, e.g., United States ex redispensed medication. rel. Siewick v. Jamieson Sci & Eng’g, Inc. , 214 F.3d 1372, 1376 (D.C. Cir. 2000). [11]
In so concluding, we recognize that the second claim would be submitted to We have not yet adopted this theory of Medicaid for payment for the same FCA liability. However, other Courts of medication. When Pompton submits the Appeals have. The Second Circuit noted second claim, it knows that the medication, in Mikes that it was joining the “Fourth, which is the subject of that claim, was Fifth, Ninth, and District of Columbia already dispensed once and returned. Circuits in ruling that a claim under the Pompton also knows that Medicaid has Act is legally false only where a party already paid 50% of the cost of the certifies compliance with a statute or medication. However, because New regulation as a condition to governmental Jersey regulations allow Pompton to payment.” 274 F.3d at 697 (citations recycle returned medications and because omitted). no regulation requires Pompton and other In Mikes , the court limited the Medicaid pharmacies to credit Medicaid applicability of the implied false for the returns, we conclude that we cannot certification theory to cases where “the impose FCA liability based on the underlying statute or regulation upon submission of the second claim. which the plaintiff relies expressly states
the provider must comply in order to be C.The Recyc ling of Repackaged paid.” 274 F.3d at 699. The court limited Medications FCA liability, premised on a legally false
certification, to those situations where a The MC-6 form requires Pompton party certifies compliance with an to certify that the “services covered by this underlying statute or regulation as a claim and the amount charged thereof are condition of payment because the FCA in accordance with . . . [Medicaid] aims to impose liability only where a regulations . . ..” Quinn argues that certification of compliance influences the Pompton violated §§ 3729(a)(1) and (2) of the New Jersey Administrative Code when it submitted claims to Medicaid because [11] Legally false certification is the certification on the claim constituted different than factually false certification, an implied false certification that the “which involves an incorrect description returned medication was recycled in of goods or services provided or a accordance with “regulations.” request for reimbursement for goods or The “certification theory” of FCA services never provided.” Mikes , 274 liability is based on a false representation F.3d at 697. 70 (Bankr. D. Del. 2002) [13] ; United States government’s decision to pay. Id . at 697 (noting that the FCA “does not encompass ex rel. Cooper v. Gentiva Health Servs, t h o s e i n s t a n c e s o f r e g u l a t o r y Inc. , No. 01-508, slip op. at 2-3, 2003 WL noncompliance that are irrelevant to the 22495607, (W.D.Pa. Nov. 4, 2003); United government’s disbursement decisions”). [12] States ex rel. Watson v. Connecticut Gen’l Under this approach, when an underlying Life Ins. Co. , No. 98-6698, 2003 WL regulation expressly prohibits payment 303142, at * 10 (E.D.Pa. Feb. 11, 2003). upon non-compliance with its terms, the In support of imposing liability submission of a claim implicitly certifies under this theory, Quinn relies on § 13:39- compliance with that regulation. 9 . 1 5 ( a )( 2 ) o f t h e N e w J e r s e y
District courts in the Third Circuit, Administrative Code, Board of Pharmacy including the court in this case, have cited Regulations, which provides: “If a unit Mikes in support of the concept of false dose packaged medication has been stored certification liability. See In re Genesis in a medication room or secure area in the Health Ventures, Inc. , 272 B.R. 558, 569- institution and the medication seal and
control number are intact, the medication may be recycled and redispensed.” Medicaid regulations require pharmacies [12] The Second Circuit declined to to comply with Board of Pharmacy follow the broader approach taken in Ab- Regulations in order to participate in the Tech Construction, Inc. v. United States , Medicaid program. See N.J.A.C. § 10:51- 31 Fed. Cl. 429 (Fed. Cl. 1994), aff’d 1.2(d) (expressly incorporating the without opinion , 57 F.3d 1084 (Fed. Cir. requirements of N.J.A.C. § 13:39). 1995), where “the Court of Federal The District Court held that failure Claims held that the defendants’ to comply with the Board of Pharmacy submission of payment vouchers, regulations may disqualify a provider from although containing no express particip ation in the program, but representation, implicitly certified their compliance with the regulations is not a continued adherence to the eligibility condition to payment by Medicaid. Quinn , requirements of a federal small business slip op. at 14-15. Quinn contends, statutory program.” Mikes , 274 F.3d at however, that a finding of FCA liability, 699 (citing Ab-Tech , 31 Fed. Cl. at 434). based on implied false certification theory, The Mikes court reasoned that “[t]he Ab- should not be limited to situations where Tech rationale . . . does not fit comfortably into the health care context because the False Claims Act was not the underlying regulation or statute comply with Medicaid regulations. The expressly states that compliance is a Medicaid regulations expressly incorporate condition of payment. Quinn argues that compliance with the Board of Pharmacy there should be FCA liability when non- Regulations, including N.J.A.C. § 13:39- c ompli an ce wit h the u nder lying 9.15, as a condition to participation in the regulations would disqualify the provider program. If a provider does not comply from participation and that there should be with the Medicaid regulations, by reason FCA liability here because the improper of not complying with the incorporated recycling of medications would disqualify Board of Pharmacy regulations, not only Pompton from participation in the will the provider be ineligible to Medicaid program. [14] participate in the Medicaid program, but
Here, the MC-6 form requires Medicaid may seek to recover the money providers to certify that the pharmaceutical it paid to the provider for services covered services by the claims. See N.J.A.C. § 10:49-
9.8(c). Quinn’s arguments are compelling. Even though § 13:39-9.15 does not [14] The United States filed a brief as expr essly c o ndition payme nt o n amicus curiae in the appeal of the compliance with its terms, it hardly can be Bankruptcy Court’s decision in Genesis said that non-compliance with its terms is Health Ventures , 272 B.R. 558. The “ irr ele vant to the g over nm ent’ s government refers to the 1986 Senate disbursement decisions.” Mikes , 274 F.3d Report, which states that “claims may be at 697. However, even if Pompton does false even though the services are not qualify for Medicaid reimbursement if provided as claimed if, for example, the it dispenses an improperly recycled claimant is ineligible to participate in the medication to a Medicaid patient, we program .” S.Rep.No. 99-345 at 9, cannot say that, in this case, Pompton has reprinted in 1986 U.S.C.C.A.N. 5266, made any false certifications in connection 5274 (emphasis added). The report also with a Medicaid claim. The reason we states that a false claim “may take many come to this conclusion is because of the forms, the most common being a claim impossibility of proving from the numbers for goods or services not provided, or alone that a claim was made by Pompton provided in violation of contract terms, to Medicaid for an improperly recycled specifications, statute or regulation.” Id . medication. The government argues that Congress If 100% of the medications that intended eligibility for program Pompton dispensed were paid for by participation and compliance with Medicaid, then a fortiori , any claim for an contract terms, specifications, statutes or improperly recycled medication would be regulations to be conditions which must paid for by Medicaid. If that claim was be met in order for claims to be true made on Form MC-6, it would be under the FCA. inevitable that Pompton had violated the District Court with a single instance N.J.A.C. § 3729(a)(1) and (2), and where Pompton submitted a claim for Medicaid would be paying Pompton on the payment for medications recycled in violation of § 13:39-9.15. [16] For that basis of a false certification. Such a situation would be similar to the one in reason, Quinn’s false certification claim Krizek , 192 F.3d 1024, where we know fails. that a false claim had to have been made D. The Failure to Give Medicaid 100% when 25 or more hours were being Credit for Returned Medications charged to M edicaid for a 24 hour day.
In the present case, however, Quinn cannot demonstrate either that an [16] We do find, however, that there improperly recycled medication was paid would be enough evidence in the record for by Medicaid or that it was paid for by to create a genuine issue of material fact one of the other sources of payment for the as to whether Pompton was recycling medications that Pompton dispensed. unit dose packaged medications in Although we might hypothesize that 60 % violation of N.J.A.C. § 13:39-9.15. of the improperly recycled medications Quinn witnessed Pompton’s employees were paid for by Medicaid, it is impossible recycling medications by removing pills to rule out the chance that they were paid from their sealed packaging, placing the for by non-Medicaid sources. [15] For this pills in large containers, and then reason, we agree with the District Court resealing the pills in new packages using that “even assuming that the MC-6 an iron. The attorney for Pompton certified compliance with Board of admitted to the District Court at the Pharmacy regulations as a condition of summary judgment hearing that returned payment, Plaintiff has not pointed to sales medications were repackaged. See inconsistent with the certification.” Quinn , Transcript of Proceedings dated slip op. at 14. As with our discussion on November 25, 2002 at A7. This alone, successive claims, Quinn did not provide however, is insufficient to withstand Pompton’s motion for summary judgment. Quinn submits that every sale [15] We could even hypothesize that if has a proportion of recycled inventory improperly recycled medications because recycled medications are comprised more that 40% of the returned to inventory. Since at least 60% medications that Pompton dispensed, it of Pompton’s sales are to Medicaid would be inevitable that a falsely patients, Quinn argues that at least 60% certified claim had been made to of the improperly recycled medications Medicaid, the source of 60% of must have been paid for by Medicaid. Pompton’s receipts. There are, however, As we discuss supra , however, this insufficient facts in the record to support “must have been” theory of liability even this more generous hypothesis. cannot serve as a basis for FCA liability.
The reverse false claim provision of p h a r m a c i s t a n d a f a c i l i t y the FCA imposes liability on any person representative. who “knowingly makes, uses, or causes to be made or used, a false record or Pompton maintains that § 8:39- statement to conceal, avoid, or decrease an 29.4(j) does not impose an obligation to obligation to pay or transmit money or credit Medicaid because Pompton is not a property to the Government.” 31 U.S.C. § “facility.” Quinn responds that § 8:39- 3729(a)(7). To make a prima facie case of 29.4(j) does require Pompton to credit liability under § 3729(a)(7), the plaintiff Medicaid for returned medications because must prove that the defendant did not pay the definition of “facility” includes back to the government money or property pharmacies. Quinn argues that this section that it was obligated to return. The District requires Pompton to credit Medicaid 100% Court held that Pompton was not liable because “credit” means “full credit,” and under the reverse false claim provision “[i]f something less than full credit was because it found that Pompton is under no acceptable to the State, then the regulation legal obligation to credit Medicaid for would have said so.” returned medications. A prerequisite for As the District Court noted, “[i]t is liability under this theory is a legal debatable whether . . . [N.J.A.C. § 8:39- obligation to credit Medicaid 100% for 29-4(j)] even governs the conduct of returned medications. The District Court Medicaid pharmacies.” Section 8:39-29- noted that there is no federal or New 4(j) is a regulation promulgated by the Jersey Medicaid statute or regulation Department of Health and Senior Services, which specifically requires that Pompton not Medicaid. The regulation appears do so. Id. , at 15-16. under Chapter 39, which is titled
Quinn asserts that Pompton’s “Standards for Licensure of Long-Term failure to give 100 % credit to Medicaid Care Facilities.” This alone suggests that violated § 3729(a)(7) of the FCA. Quinn nursing homes, as opposed to pharmacies, argues that § 8:39-29.4(j) of the New are required to create a “crediting Jersey Administrative Code imposes a mechanism.” legal obligation on Pompton to credit The term “facility” is defined as “a Medicaid for returned pharmaceuticals. facility or distinct part of a facility licensed That section provides: by the New Jersey State Department of
Where allowable by law, the Health and Senior Services as a long-term facility shall generate a crediting care facility.” N.J.A.C. § 8:39-1.2. mech a n ism for med ications Pompton is not a “facility” within this dispensed in a unit-of-use drug definition because it is not licensed as a distribution system, or other system long-term care facility. Furthermore, it that allows for the re-use of does not make sense for Pompton, a medications. The crediting system pharmacy, to be considered a “facility” shall be monitored by the provider within the regulation’s definition when, if
it were considered a “facility,” it would, in consumers and the State Medicaid addition, have to maintain a pharmacy. program will benefit from this See id. § 8:39-29.1 (facilities “shall have a proposed rule. consultant pharmacist and either a provider pharmacist, or if the facility has an in- 26 N.J.R. 1776 (Monday, May 2, 1994). h o u s e p h a r m a c y, a d ir e ctor of The other passage states: pharmaceutical services”). The economic impact of this
Although Pompton is not a amendment should result in savings “facility,” the second sentence of the to residents and families and third regulation requires Pompton, because it is party payors such as Medicaid. a provider pharmacist, to monitor the These savings will occur as a result facility’s crediting system. See id. § 8:39- of drugs which will be returned to 29.4(j). Therefore, Pompton, acting as a the pharmacy for credit. Drugs long-term care facility’s mandatory which have been . . . returned to the pharmacy provider, does have an pharmacy will be credited to that obligation under this regulation to resident . . . The overall savings to “observe, watch, or check” the crediting residents, families and Medicaid mechanism put in place by the long-term may exceed $200,000. care facility. See id. § 8:39-1.2. This obligation to monitor, however, does not 29 N.J.R. 4415(a) (Monday, October 20, expressly include an obligation to credit 1997). These two passages do lend Medicaid for returned medications. support for Quinn’s argument that state
Quinn cites two passages in the officials expected N.J.A.C. § 8:38-29.4(j) New Jersey Register in support of his to result in savings for Medicaid as a result argument that Pompton has an obligation of crediting. It nevertheless is not clear to credit Medicaid for returned who has an obligation to credit and how medications. The first passage states: much credit is required to be given.
The D epa rtment anticip ate s Even if the regulation imposed significant cost savings will accrue upon Pompton an obligation to credit as a result of N.J.A.C. § 8:39- Medicaid, as the District Court noted, “it 29.4(j) . . . The rule discontinues does not impose upon them a requirement the current requirement to destroy that they credit Medicaid any specific all unused medications . . . [T]he amount for returned medications.” Quinn , product is returnable and can be slip op. at 16. Quinn argues that credit dispensed again by the retail means 100%. We conclude, however, that, pharmacy. Although no statewide in light of the absence of a clear obligation dollar impact is available, literally to credit Medicaid and the absence of any thousands of dollars of medications Medicaid or other regulation requiring are destroyed by many facilities provider pharmacies to credit at a specific monthly. Both private pay rate, we can not impose FCA liability on
Pompton. [17] NJ KidCare programs capitate the Quinn also argues that Pompton, by dispensing fee for each prescription deducting 50% to cover the costs of for beneficiaries in Medicaid- recycling, violates N.J.A.C. § 10:49-14.5. approved nursing facilities . . . This Medicaid regulation provides: “A Additional dispensing fees (add- provider shall not pay nor require payment ons) per prescription shall be given of an administrative charge or service fee to pharmacy providers who provide . . . for services for which reimbursement the following levels of services: is included as part of the Medicaid . . . fee.” The District Court rejected Quinn’s 1. Twenty-Four Hour Unit Dose argument, noting that it “assumes that such Service: Pharmacies . . . dispensing a restocking fee pays for a service ‘for medication in a dispensing system which reimbursement is included’ in other in which a 24-hour supply of unit Medicaid payments . . ..” Id. dose oral medication . . . is
Quinn argues that the capitation delivered for each beneficiary payment Medicaid pays to Pompton for daily, shall be reimbursed the cost medications dispensed to Medicaid of all reimbursable medication plus beneficiaries is understood to include the a fee of $0.656 per beneficiary day. costs associated with returns. N.J.A.C . § 10:51-2.7, titled “Prescription dispensing Edward Vaccaro, Assistant Director fee (capitation)” provides, in relevant part: of the Office of Health Service
(a) The New Jersey Medicaid and Administration within DMAHS, explained in his depositions that “[t]he capitation . . . attempts to compensate the pharmacy for different costs associated with delivery [17] Edward Vaccaro, a New Jersey systems, which is why the 24-hour unit Medicaid representative, stated during dose is the higher capitation . . ..” He also his deposition that the regulations at stated that “[c]apitation is intended to issue in this case require pharmacies to reimburse providers of long-term care provide credit for returned medications at pharmacy services for the costs associated 100%. Quinn asks us to accord this with the dispensing of drugs . . . [and] [i]n statement deference as an agency the case of long-term care, I would interpretation. However, the statement, consider recycling to be part of offered in a litigation setting, was not the dispensing.” Because only unit dose drugs product of a rulemaking or an official may be recycled, it may be fairly agency interpretation. Thus, regardless understood by Vaccaro that the capitation of any deference that may be due a state fee covers the costs of redispensing the agency’s interpretation of its own returned drugs. However, as Vaccaro regulations, we are not persuaded that the admitted, there is no regulation that statement represents an official agency explicitly bars the collection of a position on this matter. liability. [18] restocking and redispens ing f ee. Furthermore, § 10:51-2.7 does not indicate that the cost of restocking and V. CONCLUSION redispensing returned medications is included in the capitation payment. For the foregoing reasons, we will Therefore, Pompton is not charging “an affirm the District Court’s grant of summary judgment against Thomas Quinn. administrative charge or service fee . . . for services for which reimbursement is In doing so, we are constrained by the lack included as part of the Medicaid . . . fee.” of a regulation requiring that credit be given for recycled medications. We N.J.A.C. § 10:49-14.5.
Finally, Quinn argues that Pompton believe that Congress and/or the New acknowledges an obligation to fully credit Jersey legislature might serve Medicaid Medicaid by submitting reimbursement well if this lack of regulation were checks to Medicaid. Nevertheless, in corrected. order for there to be liability under § 3 7 2 9 ( a ) ( 7 ) o f t h e F C A , a misrepresentation must be made to “conceal, avoid, or decrease an obligation to pay or transmit money or property to the Government.” 31 U.S.C. § 3729(a)(7). Even if Pompton’s payments are implicit representations that they are giving full credit, without a clear obligation to credit Medicaid, these representations are not made to avoid or decrease a legal obligation. As the District Court noted, “[e]ven if the relevant regulations could be construed to contain such an obligation, the lack of clear legal authority might preclude any finding that Defendants breached the obligation with the requisite level of knowledge.” Quinn , slip op. at 19, n.16.
We conclude, therefore, that the failure to credit 100% of the cost of the medication is not a basis for FCA [18] Quinn also appears to make a worthless services claim in his reply brief. He did not pursue, and the District Court did not rule on, this claim below. Therefore, we will not address it.
NOTES
[2] Medicaid services are financed by medication, the death of a patient, or the the state governments and the federal transfer of a patient out of a long-term government. In New Jersey, the Division care facility are common reasons why of Medical Assistance and Health medications are returned. Services (DMAHS) administers the
[5] Recycling involves restocking and program. redispensing the returned medications.
[3] The New Jersey Health Services Unit dose packaging means single tablets Program is Medicaid. See N.J. S TAT . contained in sealed blister packs.
[13] The decision of the Bankruptcy designed for use as a blunt instrument to enforce compliance with all medical Court in Genesis Health Ventures was regulations – but rather only those affirmed by the District Court, . regulations that are a precondition to This case is currently on appeal to this payment . . ..” 274 F.3d at 699. Court.
