Whistleblower Client Defeats National Pharmacy Chain’s Motion to Dismiss Medicare Fraud Claims Alleging Medication Therapy Management Consultations Were “Worthless Services”

Representing their whistleblower client (“Relator”) in a qui tam case in which the federal government declined to intervene, RKJ attorneys Adam Rabin, Havan Clark, and Andrew Abreu, together with co-counsel Rosalyn Sia Baker-Barnes, prevailed in defeating a national pharmacy chain’s motion to dismiss the Second Amended Complaint (“Complaint”), as detailed in U.S. District Judge Beth Bloom’s 44-page Order on Motion to Dismiss issued in the matter styled U.S. ex rel. Mosley v. Walgreen Co., Case No. 9:18-cv-80200-BB, pending in the U.S. District Court for the Southern District of Florida.

In this case, Relator alleges that the pharmacy chain engaged in a fraudulent scheme, in which it sought to maximize reimbursement for performing Medication Therapy Management (“MTM”) services for customers. The problem was that the pharmacy sought to perform these services without incurring necessary pharmacist labor costs, including encouraging its pharmacists to perform and bill for sham MTM services that did not conform with regulatory and industry standards.

By performing MTM services in a manner that fell so far below the regulatory and industry standards that the services were essentially worthless and yet billing and receiving federal reimbursement for those services, Relator alleges that the pharmacy violated the False Claims Act (“FCA”) by presenting, or causing to be presented, to the government false or fraudulent claims for payment and by making or using, or causing to be made or used, false records material to get false or fraudulent claims paid by the government.

In its motion to dismiss, the pharmacy principally argued that the Complaint should be dismissed for failure to plausibly allege: (1) that compliance with certain Centers for Medicare and Medicaid Servies (“CMS”) regulations and industry guidance was a prerequisite for payment of the MTM claims; (2) that the MTM services were entirely “worthless,” as opposed to the pharmacy’s argument that the services were just “worth less”; and (3) that CMS paid the pharmacy for false claims for MTM services. The pharmacy also contended that the Complaint failed to sufficiently allege the elements of scienter, materiality, and a nationwide scheme.

As to the pharmacy’s first argument, the Court ruled that because the Complaint alleged the MTM scheme under a “worthless services” theory—which is considered a factually false theory—the Complaint need not plead that compliance with CMS guidelines and industry standards was a prerequisite to payment. The Court recognized—as have several other federal circuit and district courts across the country—that “worthless services” is a viable and distinct theory of liability under the FCA, the pleading requirements for which should not be conflated with a false certification theory (i.e., the claim submitted was legally false).

Regarding the pharmacy’s argument that the Complaint did not sufficiently allege completely worthless MTM services, but instead only alleged services that were of diminished value, the Court found that the Complaint plausibly alleged both generally, and through several representative examples, that the MTM services performed were worthless. The Court predicated this finding, in part, on Relator’s allegations that the pharmacists routinely did not fill out or used a generic, cut-and-pasted statement to fill out Medication Action Plans, one of the documents provided to the Medicare beneficiary to memorialize the MTM service encounter, and the main document that would indicate whether an MTM encounter was individualized, as required by CMS.

As to establishing government payment of claims, the Court also found that Relator had adequately alleged the Medicare Part D payment structure and how CMS—through Part D Sponsors, MTM vendors, and pharmacies—pay claims for MTM services. The Court rejected the pharmacy’s argument that because CMS pays the pharmacy indirectly through Part D Sponsors and MTM vendors, the claim submission and payment processes are too attenuated to state a claim for payment of a false claim.

Finally, the Court rejected the pharmacy’s arguments regarding scienter, materiality, and national scheme, ruling that the Complaint plausibly alleged that the MTM scheme occurred on a nationwide scale.

If you know of a company or person that has committed Medicare fraud or otherwise violated the False Claims Act, contact the attorneys at Rabin Kammerer Johnson at (561) 659-7878.