A district court properly dismissed a False Claims Act (FCA) (31 U.S.C. §3729 et seq.) suit in which the qui tam relators alleged facts that had been extensively covered by media. The U.S. Court of Appeals for the First Circuit upheld the dismissal of a suit filed against CVS Caremark Corporation (CVS), finding that the FCA’s public disclosure bar prohibited the claim. A relator’s ability to receive a portion of the funds recovered was created in order to incentivize witnesses to reveal fraudulent activity, and once that activity is revealed, the purpose has been achieved (U.S. ex rel. Winkelman v. CVS Caremark Corporation, June 30, 2016. Selya, B.).
Original suit. The relators alleged that CVS’ health savings pass (HSP) program, which entitled members to purchase some generic drugs at a discounted price, violated the FCA. According to the complaint, the program’s structure allowed CVS to overbill Medicare Part D and Medicaid, because payments for drugs are based on the usual and customary (U&C) price for that drug. CVS allegedly reported non-HSP prices as the U&C price, raising the amount the company could receive in government reimbursements. The suit was filed in 2011.
Media coverage. In 2010, labor unions compared HSP drug prices with prices charged to federal employees covered by the Federal Employee Health Benefits Program (FEHBP), and concluded that CVS overcharged the government a large sum of money as the FEHBP’s pharmacy benefit’s manager. News media covered the report extensively, and the allegations spawned a congressional hearing and a Congressional Research Service (CRS) report. Connecticut altered its statutes to require the HSP price to be reported to the Medicaid program, CVS threatened to end that program in the state, and the state attorney general subpoenaed the company for program details. These actions also garnered news coverage.
When the complaint was unsealed in 2014, CMS moved for dismissal on the grounds that the news coverage triggered the FCA’s public disclosure bar. The district court agreed and dismissed the complaint (see Nothing new, no reward for you per public disclosure bar, July 31, 2015).
Public disclosure bar and jurisdiction. The public disclosure bar prevents "opportunists" from succeeding on qui tam complaints based on information that has already been made available to the public in an attempt to share in the proceeds of the suit. In 2009, certain language in the FCA could strip a court of its jurisdiction over such a matter if public disclosure was received from certain sources. Section 10104(j) of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) altered the public disclosure bar, and amended the FCA to state that a court shall dismiss a complaint if the same allegations or transactions had been publicly disclosed.
The district court noted that Congress purposely removed the jurisdiction-stripping language and therefore found that the new public disclosure bar was not jurisdictional. The appeals court declined to resolve the jurisdictional question, finding that the evidence was properly before the card, regardless of whether the bar was jurisdictional. In addition, the court noted that under both versions of the statute, reports in the "news media," disclosures in congressional hearings, and federal reports are all considered to be sources that trigger the public disclosure bar.
Trigger. Determining whether the public disclosure bar was triggered requires a three-step analysis. The court must determine whether the allegations were previously publicly disclosed and whether those disclosures came through a statutorily listed method. Affirmative answers to both next require an examination of the allegations or transactions on which the complaint is based in order to determine whether they are substantially the same as those publicly disclosed.
The relators’ arguments hinged on the last question of the analysis. They argued that the relevant transactions on which the complaint rests were not publicly disclosed, and that they are not substantially the same as those that were disclosed. They argued that their facts related to CVS’ failure to charge Medicare and state Medicaid programs the actual U&C rate were not previously disclosed. The court disagreed with this assessment, noting that the Connecticut Attorney General’s press release revealed a belief that CVS did not provide Medicaid the lowest drug price offered to consumers. The public disclosure bar was triggered, and the dismissal affirmed.
The case is No. 15-1991.
Attorneys: Robert Paul Christensen (Robert P. Christensen, PA) for Myron Winkleman. Roy Awabdeh (Williams & Connolly LLP) and James W. Evans (Choate Hall & Stewart LLP) for CVS Caremark Corp., Caremark RX, LLC, f/k/a Caremark RX, Inc., and Caremark PCS LLC.
Companies: United States of America; CVS Caremark Corp.; Caremark RX, LLC, f/k/a Caremark RX, Inc.; Caremark PCS LLC
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