Health Law Daily FCA action against SuperValu, Inc. will continue
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Tuesday, October 25, 2016

FCA action against SuperValu, Inc. will continue

By Harold Bishop, J.D.

Relators who filed a qui tam complaint against a corporation and its subsidiaries that operate or control numerous pharmacies in 25 states sufficiently pled violations under the federal False Claims Act (FCA) and related state laws. The action alleged that the corporation and its subsidiaries did not include price-match discounts when calculating "usual and customary prices" submitted to government payors. The court found the relators’ pleadings sufficient, noting that state Medicaid agencies and Medicare Part D should not pay more than the prevailing market rate (U.S. ex rel. Schutte v. Supervalu, Inc., Mills, R.).

Background. The corporation, SuperValu, Inc., and its subsidiaries (collectively, SuperValu), operate and control approximately 2,500 retail grocery locations and over 800 pharmacies in 25 states within the United States.

The relators allege that starting in late 2006 to 2007, SuperValu implemented a "Price Matching" program to match certain competitors’ prices for generic drugs. The relators claim that the matched competitor prices rather than the cash prices became the usual and customary prices that should have been passed on to government payers. The relators assert that by not including price-match discounts in their usual and customary calculations, SuperValu knowingly submitted false claims for reimbursement to federal healthcare programs.

The federal government declined to intervene in the case.

SuperValu moved to dismiss, attacking the sufficiency of the amended complaint, including the following elements: claim for payment, falsity, knowledge and materiality, certification of the claims, and sufficient specificity. With regard to these claims by SuperValu, the court held as follows:

  • Claims for payment. Based on the relators’ allegations of a uniform, nationwide and fraudulent scheme facilitated through a shared centralized pharmacy transaction system, the relators’ allegations provided SuperValu with fair notice of the claims for payment.
  • Falsity. By alleging that SuperValu violated federal regulations, the relators provided fair notice of falsity under the FCA.
  • Knowledge and materiality. Upon reviewing the allegations, the relators’ allegations met the "knowledge" and "materiality" components of the FCA.
  • Certification. Because a number of the allegations in the amended complaint related to alleged false information submitted by SuperValu, the relators’ met the certification requirements.
  • Specificity. Representative examples of the scheme put SuperValu on notice of the allegations with sufficient specificity.

The court also noted that the Seventh Circuit has held that state Medicaid and Medicare Part D should not pay more for prescribed drugs than the prevailing market retail price. Accordingly, the regulations related to "usual and customary" price should be read to ensure that where a pharmacy regularly offers a price to its cash purchasers of a particular drug, the state Medicaid agency and Medicare Part D should receive the benefit of that deal.

SuperValu’s motion to dismiss was denied.

The case is No. 11-3290.

Attorneys: Gail Linn Noll, U.S. Attorney's Office, for the United States; Frederick Robinson (Norton Rose Fulbright US LLP) for SuperValu Inc., ACME Sav-On Pharmacy and Albertsons Osco Pharmacy.

Companies: SuperValu Inc.; ACME Sav-On Pharmacy; Albertsons Osco Pharmacy

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