False Claims Act Case Offers Lessons for Pharmacists on Pricing Compliance

The cost and pricing of pharmaceuticals are matters of substantial scrutiny. In March 2025, a jury in an Illinois federal court decided in favor of a pharmacy chain that its false claims for medication reimbursement did not damage the federal government. This case was litigated over 14 years and included a review by the US Supreme Court.¹

A central issue in the case involved the determination of the pharmacy’s usual and customary (U&C) price, and whether the pharmacy acted with knowledge that the U&C price submitted to Medicare was wrong. A definition of U&C pricing is not available in statute, but there is a guidance definition from the Centers for Medicare & Medicaid Services: the price that an out-of-network pharmacy or a physician’s office charges a patient who does not have any form of prescription drug coverage for a covered Part D drug.²

In the legal system, most prohibited conduct hinges on the intent of the defendant party. The intent or knowledge that a party is acting with wrongdoing is referred to as scienter.³ In this case, the pharmacy chain was alleged to have knowingly misrepresented its U&C price to the government. The chain used a price-matching program that gave substantial discounts, below their U&C, for customers to transfer in their prescriptions. The pharmacy is alleged to have submitted its retail price to the government as its U&C price and did not factor in the price-matching discounts. Accordingly, this action would be expected to result in greater reimbursement to the pharmacy chain.

Legal Process and Practice Implications

During the case, there was an appeal to the US Supreme Court to clarify the standards for scienter in a case for violation of the False Claims Act (FCA). The Supreme Court identified the following criteria to demonstrate wrongdoing by the party¹:

• The party knew the submitted claim was false.
• The party was aware of a substantial risk that the claim violated the FCA, and intentionally did not take steps to clarify whether it would violate the FCA.
• The party was aware of substantial and unjustifiable risk but submitted the claim anyway.

When this standard was applied in the Illinois case, the jury found that the pharmacy chain did knowingly submit false claims for reimbursement by not incorporating the price-matching discounts; however, the jury also found that the difference between price-matching and U&C price did not otherwise damage the US government. Accordingly, the jury decision favors the pharmacy chain.¹

This case does help to clarify the parameters of the intent/knowledge requirement and its legal application, although there may be continuing ambiguity regarding the calculation of U&C pricing.

REFERENCES

1. US ex rel Schutte v Supervalu, 598 US 739 (2025).

2. Medicare Prescription Drug Benefit Manual. Chapter 5: Benefits and Beneficiary Protections. September 20, 2011. Accessed October 20, 2025. https://www.cms.gov/files/document/chapter-5-benefits-and-beneficiary-protection-v92011.pdf

3. Scienter. Cornell Law School. Updated June 2024. Accessed October 20, 2025. https://www.law.cornell.edu/wex/scienter