Federal court action alleges federal, state violations by former national chain employer.
Issue of the Case
When a pharmacist files a lawsuit in federal court alleging false claims for reimbursement were submitted by her employer (a national pharmacy chain) and the trial court dismisses the action for failure to provide sufficient detail but allows revision of the claims, will the revised statement of facts be sufficient for the lawsuit to proceed?
Facts of the Case
A pharmacist who was a long-term employee of a national pharmacy chain filed a whistleblower complaint against her employer under the federal statute known as the False Claims Act. She alleged that the firm had been submitting false claims to both Medicaid and Medicare, rooting her arguments in both federal and state law. The matter was filed in a federal district court. Although both attorneys representing the federal and state government were given the opportunity to intervene to take over the case, they declined.
The False Claims Act is a long-standing product of the Civil War, aimed at punishing firms or individuals that attempt to defraud the federal government. Enacted in 1863, this statute was a result of vendors selling the army malfunctioning ammunition and firearms, as well as other unusable supplies.
Having been enacted during the administration of President Abraham Lincoln, this statute is sometimes referred to as the Lincoln Law. This statute includes a provision that is rooted in Anglo-American law back to the 14th century. Known as a “qui tam” law, these statutes reward the individual who uncovers, reports, and begins proceedings against the alleged violator with a portion of the financial recovery.
The individual who launched the legal action is referred to as the relator. The relator, more colloquially and frequently referred to as the whistleblower, launches the action and then approaches the federal government about taking over the suit.
If the government decides to do so and pursues the matter to a successful judgment, the relator is paid a percentage of the recovery. Although the federal statute originally had a principal focus on defense contracts, over the years, it has come to be used very frequently and successfully against perpetrators of health care fraud—both firms and individual practitioners.
Following the federal and state governments’ declining to intervene, the trial court gave the pharmacist plaintiff an opportunity to revise the wording of her legal complaint filed with the court, and the defendant chain made a motion to dismiss the lawsuit. Her attorneys made the revisions, but the federal trial court once again dismissed her False Claims Act arguments by deciding that she had failed to revise them with sufficient detail to support the lawsuit. She had provided 10 examples of what she designated as fraudulent billing practices in her second filing. She submitted those additional details to the judge, with a request that her case be reinstated. The trial court judge dismissed the lawsuit, and the pharmacist’s attorney appealed that decision to the relevant federal appellate court, arguing that the trial court judge had erred with the dismissal ruling.
The federal appeals court judges reviewed her revised submission, comparing it with what the statute specifies is needed to support such a claim. The judges concluded that her filing still came up short.
The Court's Reasoning
The judges concluded that the second filing still failed to provide sufficient details for the matter to proceed. The wording of the statute is that liability applies when someone “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” or “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.”1
The judges’ review of the 10 examples provided by the plaintiff of what she viewed as allegedly fraudulent billing practices led them to conclude that her examples reflected nothing more than innocent negligence or mistake.
The requirement that the violation be committed knowingly does not include liability for innocent negligence or mistakes.
Specifying what they were seeking, the appellate court judges emphasized the standard set forth in a prior decision that “conclusory allegations that do not provide specifics as to the ‘who, what, when, where, and how of the alleged fraud’ are insufficient” to support the lawsuit.2
When the trial court judge first dismissed the lawsuit and gave the pharmacist the opportunity to make revisions and a resubmission, he had empha-sized that her revisions should provide more details, but he concluded that the second submission had the same deficiency of detail as her first one. Hence, the trial court judge’s ruling of dismissal was correct and upheld by the court of appeals.
1. False Claims, 31 USC §3729 (a)(1)(A)-(B).
2. United States ex rel. Colquitt v Abbott Labs, 858 F3d 365, 371 (5th Cir 2017).
About the Author
Joseph L. Fink III, JD, DSC(Hon.), BSPharm, FAPHA, is professor emeritus of pharmacy law and policy at the University of Kentucky College of Pharmacy in Lexington.