The district court dismissed a qui tam complaint alleging that a prescription lens manufacturer provided illegal kickbacks to eyecare professionals in the form of reward and incentive programs. The court found the manufacturer freely disclosed the contents of its buyer incentive programs on its website and in various publications, and that it would have been logical to infer that any discounts and rewards were not passed on to insurance providers. Therefore, the court found the allegation had been sufficiently disclosed to trigger the public disclosure bar. The relator asserted that he qualified as an original source, but the court found the pleadings vague on whether the relator had informed the government of his claims before filing his lawsuit. The court dismissed the complaint but gave the relator leave to clarify.
Defendants Shamir USA Inc., Shamir Optical Industry Ltd., Shamir Optica Holdings A.C.S. Ltd., and Shamir Insight Inc. moved to dismiss a qui tam complaint alleging that their rewards program for eyecare professionals amounted to an illegal kickback scheme that violated the False Claims Act.
The defendants are affiliated companies specializing in the development, design, and manufacture of progressive lenses for the ophthalmic industry. Relator Richard Mark was employed as Shamir’s key account manager for North America from February 2015 until December 2015, when his position was eliminated. Through its sales arm, Shamir offers sales incentives to third-party eyecare professionals through a rewards program, towards a goal of ensuring a set monthly sales order from a buyer.
Professionals who prescribe a minimum number of Shamir lenses in a calendar month receive reward points, discounts, cash rebates, gifts, and free products. Typically, Shamir assigns the most reward points to its newer and more expensive lenses to encourage providers to prescribe them, and offers higher rewards to certain large purchasers. Shamir also allowed large customers to propose their own incentive programs.
Because public insurance plans such as Medicaid reimburse providers based on their invoice pricing for Shamir’s lenses, the reimbursement claim does not factor in any rewards points or rebates. Therefore, the financial benefits of these programs are not passed on to the government. The increased profiting from the difference between the invoiced price and the actual price is apparently an inducement to providers to prescribe Shamir lenses.
The relator alleged this program violated the Anti-Kickback Statute and therefore the FCA, as Shamir caused eye care professionals to submit fraudulent claims for payment. The relator also argued that Shamir caused the submission of fraudulent claims because the invoice amounts were inflated, due to the failure to account for the rewards and cash rebates.
The defendants moved to dismiss, arguing that the complaint is foreclosed by the public disclosure bar, because Shamir has long publicly advertised the nature and operation of its rewards program.
As a threshold issue, both parties submitted requests for judicial notice. The relator submitted copies of several Shamir corporate and informational documents, as well as a copy of a healthcare presentation cited in the FAC. The defendant asked the court to take judicial notice of several articles about Shamir’s RCPV awards program from various industry publications, as well as the “about us” webpage from the publication “Vision Monday.” The court accepted all the submissions, taking notice that the information was publicly available, not to its accuracy.
The defendants asserted that the documents it provided the court described substantially the same rewards program the relator alleged was improper. The relator disputed that some of the sources qualified as news media, but the court sided with the defendants, finding that the various industry publications that featured Shamir and its products qualified for the broad category of news, which in this context generally includes websites and advertisements.
The relator argued the channels should not qualify, given the promotional character of Shamir’s cited articles, their industry-specific target audience, and their emphasis on quotation over editorial reporting. However, even under a narrow analysis, the court found the articles qualified as news media, even though they were focused on an audience in a specific industry.
The court also agreed that the details of the relator’s allegations were substantially similar to those publicly disclosed through these articles. While the articles contained no direct allegation of fraud, the court held that they provided enough information that the alleged fraud could be inferred. The court found that the purpose and operation of Shamir’s remuneration through the rewards program were publicly disclosed, as was the fact that Shamir entered into specialized programs with certain purchasing organizations for enhanced rebates. The articles made plain the key element of the relator’s alleged anti-kickback statute violation: that Shamir offered monetary incentives to induce ECPs to sell its lenses.
The court also concluded that it was widespread industry knowledge that the costs of many lenses are billed to government insurers. The elements of the alleged violation of the anti-kickback statute were therefore publicly disclosed: the payment of remuneration to induce a person to purchase a good for which payment may be made under a Federal healthcare program.
Next, the court considered whether the disclosures addressed the second claim, that provider invoices were inflated because they did not disclose the rebates. While Shamir’s disclosures did not expressly compare the specific dollar amounts of the invoice prices and those same prices as adjusted by the amount of any rebates, they did make public the precise dollar value of the rebate available for each type of lens.
Therefore, the only question was whether the available facts also showed that the value of those rebates was not factored into the price as submitted to insurers. The court found they did. First, the court reasoned that providers would not feel “rewarded” if an incentive program offered discounts that would be offset by reductions in their insurance reimbursements. Further, the program offered non-cash incentives, including points that could be redeemed for gifts. The court found no practical way that the value of consumer products obtained using points collected across numerous different sales could be factored into the actual cost of a specific pair of lenses to create an adjusted reimbursement value. Therefore, the only reasonable conclusion from the publicly disclosed facts is that the rebate value was not deducted from any insurance reimbursement. The court found enough of the facts were disclosed to allow the government to investigate, if it chose.
The relator also argued that he had provided substantially more detail regarding the operation and effects of program than was ever revealed in the disclosures identified above, particularly with regard to Shamir’s negotiation of individualized rewards schemes with large-scale purchasers under the RCPV Plus program. The court therefore examined whether the relator qualified as an original source.
First, the court noted that the public disclosures occurred before the relator was employed by Shamir, therefore he did not qualify under the exception for allegations raised prior to a public disclosure.
Under the second exception, a relator may overcome the public disclosure bar if they have information that materially adds to the complaint and have disclosed this information to the government before filing their action. In his complaint, the relator stated he had “prepared and will serve the Complaint on the Attorney General of the United States, and the United States Attorney for the Central District of California, as well as a statement of all material evidence and information currently in its possession and of which it is the original source.”
The court found this passage suggested the relator had not provided his evidence to the government at the time the complaint was filed, but only planned to do so. Therefore, the court found the relator did not qualify as an original source. However, the court granted the relator leave to amend to clarify whether he meets the statutory requirements for an original source.
