By Leah S. Poniatowski, J.D.
Despite only one claim of almost forty surviving, court declines to dismiss with prejudice to allow former pharmacy manager to correct pleading shortcomings.
A multi-count qui tam case filed against Walmart for alleged fraudulent Medicare prescription billing practices in violation of both federal and Wisconsin’s False Claims Act largely failed to meet the pleading requirements and were dismissed, except for a "short-filling" claim, a federal district court in Wisconsin ruled. The court, however, did not dismiss the claims with prejudice in order to allow the former pharmacy manager to filed a second amended complaint (U.S. ex rel Buth v. Walmart Inc., August 13, 2019, Joseph, N.).
Background. A former pharmacy manager at a Walmart in Wisconsin filed a qui tam action against the company, asserting that several of Walmart’s pharmacy practices with respect to Medicare billing had violated state and federal False Claim Acts. Specifically, she alleged that Walmart pharmacies defrauded the government by: (1) short-filling prescriptions; (2) dispensing and billing more medication than required for a certain period; (3) dispensing and billing 90-day supplies for 30-day supplies without consent or need; and (4) billing for medications with inaccurate expiration dates. According to the former manager, these schemes caused false claims and data to be sent to the government.
Short-filling. The manager alleged that the pharmacy staff was "chronically untrained and time-pressured," causing prescriptions to not be fully filled in violation of the federal False Claims Act, 31 U.S.C. § 3729(a)(1)(A). She contended that Walmart’s policies did not require correcting the errors by re-counting the medication, which lead to the company profiting from re-selling and re-billing medications via the store’s computerized inventory system which did not reflect the actual on-the-shelf count. She also stated that this issue had been reported to corporate managers.
The court held that the first two prongs of the FCA test were satisfied—that there was a claim to the government that was false. However, the court was not fully persuaded that the scienter element was established because, based on the manager’s complaint, the short-filling appeared to be the result of mistakes and negligence. The manager’s statement that management was aware of the problem did suggest that the claims could have been submitted with willful ignorance or reckless disregard, but the matter required discovery and, thus, the issue was not dismissed.
Multiple day prescriptions. The manager asserted that 31 U.S.C. § 3729(a)(1)(A) also was violated when a patient’s "day supply" of a prescription was billed in an amount higher than the actual supply provided. Although the manager provided examples of when certain medications were dispensed below the monthly supply but billed as such, there was no evidence that Walmart was aware of the practice to meet the scienter element, or that the over-filling employee submitted the claim. Thus, the claim was dismissed.
Similarly, the prescription conversion allegation, in which Walmart purportedly converted 30-day supply refills to 90-day supply refills regardless of patient consent or clinical need and then billing for the 90-day supplies was dismissed for not violating 31 U.S.C. § 3729(a)(1)(A) because the conversion to the longer period was not material to the government’s decision to pay the claims. Not complying with a regulation did not fit the "implied false certification" theory because the government in the case at bar was paying for 90 days of supplies for a valid prescription, the court explained. The manager voluntarily dismissed her fourth count concerning expiration date-related billings.
PDE data. The manager’s claim that 31 U.S.C § 3729(a)(1)(B) was violated by falsified prescription drug event (PDE) data supporting the false prescription claims was dismissed as it related to the "day supply," "conversion," and expiration date alleged schemes.
Knowing concealment. The manager alleged that Walmart also violated 31 U.S.C. § 3729(a)(1)(G) by failing to correct "short-filled" medications and return payments. The court agreed not to dismiss the claim as it pertained to the short-filling but dismissed the "knowing concealment" claim as to the other alleged schemes.
Wisconsin FCA claims. The court held that the manager’s claims based on Wisconsin’s False Claims Act failed to state a cause of action. The court agreed that the manager failed to assert a nationwide scheme with the particularity required under the heightened pleading standard. The cases upon which she relied for her position that she did not need to have knowledge beyond her own store in Wisconsin were distinguishable because she did not plead that Walmart management had knowledge of the short-filling problem at any other pharmacies than the one in Wisconsin.
Moreover, based on the dates provided of alleged "short-filling" activities, the manager failed to state a claim under the Wisconsin False Claims for Medical Assistance Act, Wis. Stat. § 20.931, because it was repealed in 2015 and none of the alleged claims occurred before 2017.
In conclusion, the court summarized that only the "short-filling" and related claims survived dismissal, but the remaining claims were not dismissed with prejudice to allow the manager to remedy the identified shortcomings in an amended complaint, and that such prejudice to Walmart would be minimal.
The case is No. 18-CV-840.
Attorneys: David J. Chizewer (Goldberg Kohn Ltd.) for Jennifer Buth. Amanda B. Robinson (Morgan Lewis & Bockius LLP) and Bryan K. Nowicki (Reinhart Boerner Van Deuren SC) for Walmart Inc.
Companies: Walmart Inc.
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