False Claims Counsel

On December 20, Senior District Judge Ronald L. Buckwalter of the Eastern District of Pennsylvania, in U.S. ex rel. Spay v. CVS Caremark Corp. denied the defendant companies’ motion to dismiss the relator’s complaint (in which the government had declined to intervene). The relator, the owner of a pharmaceutical auditing company, alleged that CVS Caremark, as a Pharmacy Benefit Manager (PBM) and its related companies, defrauded Medicare Part D by failing to provide Drug Utilization Review (DUR) services and submitting false Prescription Drug Event (PDE) claims data. CVS moved to dismiss the case on several grounds, including failure to state a claim under Fed. R. Civ. P. 12(b)(6), inadequate pleading of a nationwide scheme (based on the relator’s exposure to the claims of one Part D Plan sponsor, which had contracted with his firm to perform an audit), and public disclosure. Judge Buckwalter rejected all of CVS’s arguments, however.

First, with respect to the sufficiency of the relator’s complaint. Judge Buckwalter found:

• CMS regulations requiring accuracy in data were conditions of payment as to downstream entities, such as PBMs, even though the regulation imposing those requirements failed to expressly refer to “conditions of payment” (because the Part D Plan sponsors’ regulation clearly did so, and required that PDP Sponsors pass on their contractual requirements to subcontractors such as CVS);
• Claims which failed to comply with Maximum Allowable Cost requirements could be false even if they did not expressly misrepresent the drug’s price, because compliance with MAC was implicit in the submission of the claims;
• DUR deficiencies (including gender and age contraindications, among others) were specifically required by Part D, and so CVS’s alleged failure to provide these services as a PBM contractor to Part D sponsors could result in false claims; and
• PDE data constitute claims for payment within the meaning of the False Claims Act.

With respect to the nationwide scope of the relator’s allegations, Judge Buckwalter concluded that the relator’s pleading of claims from three states and Puerto Rico gave rise to an inference that the alleged scheme was nationwide in scope.

Finally, with respect to public disclosure, Judge Buckwalter concluded:

• Discovery materials provided in litigation between CVS and the Part D Plan sponsor in Puerto Rico were not public disclosures because of a confidentiality agreement in place between the parties; and
• PDE data submitted to CMS were not publicly disclosed because CMS regulations restricted access to researchers.