In U.S. ex rel. Winkelman et al v. CVS Caremark Corporation et al., 2016 WL 3568145 (1st Cir. 2016), the First Circuit dismissed a False Claims Act (FCA) qui tam action against CVS Caremark brought by former employees turned whistleblowers. These whistleblowers, referred to as “relators” under the FCA, alleged their previous employer had defrauded Medicaid and Medicare Part D to the tune of hundreds of millions of dollars. The scheme alleged was an elaborate one, in which CVS allegedly billed government payors using a phony and highly inflated “usual and customary” drug price, which is the highest price a carrier can charge the government under these federal programs by law. Per the First Circuit, however, the relators’ case was fatally flawed, as the fraud alleged had been publicly disclosed by the Connecticut Attorney General’s Office and local news media roughly one year before the qui tam complaint had been filed. Under the “Public Disclosure Bar,” a statutory defense contained within the FCA, such a disclosure barred the relators from suing for the fraudulent conduct alleged, the details of which were already in the public domain.
Interestingly, the relators’ qui tam complaint did provide new information about the fraud not previously disclosed by the Connecticut Attorney General’s Office or news media. Whereas the Connecticut Attorney General’s Office and news media had reported that CVS’ alleged fraud involved claims submitted to Medicaid, they did not report that claims had also been submitted to Medicare Part D. Relators’ Complaint, however, did make this allegation. The First Circuit found this additional information to be insufficiently material to save the case from preclusion under the Public Disclosure Bar because the “complaint target[ed] the same fraudulent scheme that was laid bare in the Connecticut disclosures [and] the identification of additional government programs does nothing more than add a level of detail to knowledge that was already in the public domain.” Id. What was bad news for the relators in this case could be good news for providers who find themselves on the wrong end of a qui tam suit, as this holding arguably expands the reach of the Public Disclosure Bar – a defense which can, as it did here, work to totally dismiss a qui tam lawsuit.
Frier Levitt defends healthcare providers of all stripes against qui tam lawsuits. If you have been served with a qui tam complaint or are currently under investigation for allegations of submitting fraudulent claims to government payors, you need a law firm that is well-versed in the nuances of the FCA and that remains abreast of all of the latest developments surrounding this specialized area of law. Contact Frier Levitt today.
