Health Law Daily Relator’s disparate pricing scheme claims moot after government intervention in those claims
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Monday, November 13, 2017

Relator’s disparate pricing scheme claims moot after government intervention in those claims

By Jeffrey H. Brochin, J.D.

A qui tam relator’s claims that a pharmaceutical compounding factory engaged in illegal disparate pricing schemes became moot once the government intervened on those False Claims Act (FCA) claims, thereby superseding her complaint, a federal district court in Florida has ruled. By automatic operation of the statute, the government’s complaint in intervention becomes the operative complaint as to all claims in which the government has intervened. Furthermore, as a sales representative in the New York area, the relator lacked the first-hand knowledge necessary to state a claim related to the company’s billing practices from Florida (U.S. ex rel. Stepe v. RS Compounding LLC, November 8, 2017, Covington, V.).

Background. RS Compounding is a compounding pharmacy that distributes massive quantities of pre-made compounds for both humans and animals throughout the country in a manner similar to a large pharmaceutical manufacturing company. Among their products are pain-relieving creams and gels, and 40 to 50 percent of the company’s revenues are earned from Medicare and TRICARE reimbursements. The relator was a sales representative for the company and alleged that it engaged in various schemes in order to increase reimbursements from the government, including providing pre-printed prescription pads to physicians that listed the company’s products, pre-filling the number of refills, and training of sales reps on how to coach physicians to prescribe the most highly reimbursed drugs. She also alleged drastically different billing for TRICARE patients than for uninsured patients (i.e. $1200 per bottle versus $15 and $45).

The government intervened as to the pricing scheme claims, and the company and its principals moved to dismiss the remaining claims.

Disparate pricing allegations superseded. The company argued that the relator cannot base her claims on the alleged disparate pricing scheme because the government has intervened as to those allegations. The court agreed, and noted that when the government has intervened, that portion of the relator’s complaint effectively ceases to exist because it has been superseded. By automatic operation of the statute, the government’s complaint in intervention becomes the operative complaint as to all claims in which the government has intervened.

The relator did not dispute that her disparate pricing claim was superseded by the government’s complaint, however, the court did not dismiss the relator’s disparate pricing allegations due to the fact that the appropriate action for the court to take when a defendant moves to dismiss those portions of a relator’s complaint that have been superseded by government intervention is to deny the motion as moot as it relates to the intervened claims.

Presentment of false claims. The relator also alleged that the company knowingly presented or caused to be presented false or fraudulent claims for payment or approval, and she therefore bore the burden of alleging actual presentment of a claim with particularity, meaning, stating particular facts as to the who, what, where, when, and how of fraudulent submissions to the government. Providing exact billing data—name, date, amount, and services rendered—or attaching a representative sample claim would be one way such a claim could be established. However, because the relator worked as a sales representative in the New York area, and the company’s billing was handled from their Florida headquarters, her knowledge was deemed limited to the schemes involved, but not the actual billing. As the court noted, the sine qua non of an FCA claim is the submission of a false claim for payment to the government. Without first-hand knowledge, she did not have a sufficient basis for the allegation.

For the foregoing reasons, the company’s and principals’ motions to dismiss were granted.

The case is No. 8:13-cv-03150-VMC-AEP.

Attorneys: Christopher P. Tuite, U.S. Attorney's Office, for the United States. Kevin J. Darken (The Barry A. Cohen Legal Team) for RS Compounding LLC d/b/a Zoe Scripts d/b/a Westchase Compounding Pharmacy.

Companies: RS Compounding LLC d/b/a Zoe Scripts d/b/a Westchase Compounding Pharmacy

MainStory: TopStory CaseDecisions CMSNews BillingNews DrugBiologicNews FCANews FloridaNews

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