N.D.Ga. District Judge upholds gist of relator's allegations in Medicare Part D case; requires repleading to satisfy particularity

by Ben Vernia | August 31st, 2012

On August 29, District Judge William S. Duffey, Jr., of the Northern District of Georgia, dismissed the relator’s complaint in U.S. ex rel. Fox Rx, Inc. v. Omnicare, Inc., et al., but granted the relator leave to amend in order to satisfy Rule 9(b)’s requirement of particularity.

The relator is the parent of a Medicare Part D insurance plan sponsor, which alleged that the defendants, Omnicare, Inc., and its subsidiary, NeighborCare, Inc. – both long-term care pharmacies – violated the False Claims Act. The whistleblower alleged that the company engaged in four schemes:

  • Atypical antipsychotics – The defendants submitted claims to Part D plans for drugs which failed to meet the definition of a “covered Part D drug” – an FDA-approved use, or one supported by citations in pharmaceutical compendia.
  • Prior authorization – The defendants evaded Part D plan requirements for prior authorization for atypical antipsychotic drug claims.
  • Prescription splitting – The defendants split prescriptions up into periods shorter than the prescribed duration, in order to increase revenue from dispensing fees.
  • Copayment waiver – The defendants routinely waived copayments where required by Part D plans, in order to induce patients to accept prescription drugs.

The relator alleged that each of these schemes violated the False Claims Act’s prohibitions on submitting false claims and using false records to get a claim paid.

Judge Duffey dismissed the prior authorization and prescription splitting claims entirely, reasoning that no statute or regulation prohibited dispensing a single prescription in multiple events, and that compliance with a Part D plan’s prior authorization requirements was not a condition of payment under Part D. He likewise dismissed the use of false record count regarding copayment waivers after concluding that it failed to identify any actual false record or statement.

Turning to the remaining claims and the defendants’ Rule 9(b) argument, Judge Duffey dismissed the antipsychotic claims and the remaining copayment allegation on the grounds that although the relator had provided example claims, it had not alleged their submission to Part D. He granted the relator leave to amend the complaint as to these three counts.

Disclaimer: I represent the relator in this case, along with co-counsel at Milberg LLP of New York and the Cochran Firm in Atlanta.

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