The district court granted Walgreens’ motions to dismiss claims alleging that it violated federal and state False Claims Acts and anti-kickback statutes, finding that neither the government nor relators had pled their complaints with the required particularity. The relators alleged a local pharmacy improperly auto-refilled prescriptions without patient or provider authorization, against state-level requirements for reimbursement, but the court found that neither the relators nor the government had shown any representation on a claim form where the pharmacy certified that it had received an authorization. In fact, the court noted that the claim for reimbursement would have looked the same regardless of whether the pharmacy had or had not received authorization. The court explained that the government had to allege more than a regulatory violation to bring an FCA complaint.
The court also dismissed the relators’ complaint that the pharmacy improperly waived prescription copayments and provided free consultation services to induce patients and providers to use its services, in violation of anti-kickback statutes. The court held the relators failed to provide the details of the alleged scheme and failed to account for circumstances where a pharmacy could waive copayments or provide consultation services to patients without running afoul of the law. The court also noted that copayments were not required for many of the drugs at issue in the complaint.
Relators Sarah Castillo Baier and Rita Svendsen Baier brought a qui tam action under the federal and state of Illinois False Claims Acts, alleging that Walgreen Co. and James G. Kulekowskis, a pharmacist employed by Walgreens, induced patients and providers to use a Walgreens specialty pharmacy location by: (1) routinely and systematically waiving copayments for Medicaid and Medicare patients; and (2) automatically refilling prescriptions for these same patients. The federal government and state of Illinois intervened, adding claims for common law fraud and payment by mistake, based on these allegations. The defendants moved to dismiss all complaints.
The relators learned of their complaints while employed by Walgreens as pharmacy technicians at the same location as Kulekowskis.
In their complaint, the relators first alleged that Walgreens continued to auto-refill prescriptions despite clear instructions from Illinois Health and Family Services that refills for prescriptions that would be submitted to Medicaid for payment must be initiated by a request from the prescriber, patient, or other representative. The notice specifically stated that pharmacies were prohibited from refilling prescriptions automatically, even when a prescription had remaining refills, and that HMS would not reimburse a pharmacy for any prescription claim filled using an auto refill process.
The policy was intended to stop waste and improve public safety by preventing unnecessary prescriptions from being sent to patients. According to the government, this policy had the potential to impact pharmacy sales and required pharmacies to overhaul their refill and billing processes. The government alleged Walgreen advised its pharmacists and technicians to automatically refill all prescriptions; and (2) falsely enter a notation in the computer system that the provider or the patient specifically requested the refill.
The relators alleged their pharmacy did so, and then submitted claims to Illinois for payment. They also asserted that the pharmacy’s computer system designated all patients, including Illinois Medicaid patients, as participating in the auto-refill program unless a patient specifically opted out of the service. The government provided examples of patients who did not request refills but received them anyway.
The relators also stated that after the pharmacy received a government subpoena requesting information regarding prescription refill practices, Kulekowskis called a “CYA” meeting to ensure technicians coded refills to show that requests were received, even when they were not. Kulekowskis also told the meeting participants to say that they do not do any auto-refills, but do call all patients to remind them when their prescriptions are about to run out and would need to be refilled.
The government also alleged the pharmacy provided auto-refilled prescriptions to the Ruth M. Rothstein CORE Center, which provides medical services for patients with HIV and other infectious diseases. According to representatives from the center, the pharmacy would send refills to patients at the center without being requested. The center returned unneeded medicines to the pharmacy, but the government alleged Walgreen never credited Medicaid for the unused prescriptions. The government noted that once Walgreen became involved in this investigation at the corporate level, the local pharmacy’s sales declined precipitously.
The relators next alleged that Walgreens and Kulekowskis routinely and systematically waived copayments for Medicare and Medicaid patients to induce them to fill their prescriptions at C&M, despite instructions not to do so. The pharmacy routinely did not bill patients referred by the CORE Center, and wrote off unpaid copayments as bad debt. The relators also alleged the pharmacy provided free specialized pharmacist consultations to Core Center patients and providers, even though such services could cost several hundred dollars per session.
The defendants moved to dismiss all the claims. First, the court considered the government’s claim that the defendants willfully disregarded Illinois’ auto-refill prohibition and concealed this deception in order to obtain funds from the state. The defendants argued the government failed to plead this claim with particularity, relied on impermissible group pleading, and failed to allege scienter on Walgreens’ part.
The court agreed with the defendants, first noting the government failed to show where the pharmacy had to certify its compliance with the auto-refill prohibition in its claims for reimbursement; failed to allege omitted information that rendered the description of any refilled drugs misleading; and failed to describe in sufficient detail the allegedly fraudulent auto-refill practices.
As an initial matter, the court noted the government did not clarify whether it brought its FCA claim under an express or implied false certification theory. The government did not allege that the pharmacy’s claims failed to truthfully describe the drugs provided or their costs, but only that the pharmacy did not seek patient or provider approval for the refill. The court therefore considered the allegations under the implied false certification theory.
To satisfy the requirements of this theory, the government must show a specific misrepresentation on the claim’s face or otherwise omitted information that rendered the description of the product or service misleading. However, the court found no such misrepresentation, as there was no place on the claim form to attest that a refill authorization had been obtained. While the pharmacy may have submitted claims for reimbursement for refills that were not authorized by a patient or provider, the court explained this allegation—if true—meant the pharmacy had broken a regulation, which did not give rise to the submission of a false claim.
The government argued it satisfied Rule 9(b) by providing the details of the scheme to circumvent the state prohibition on unauthorized auto-refills and provided a specific example of a claim for which the pharmacy falsified receipt of patient approval. However, the court noted that even if the pharmacy had received the proper authorization, the claim form submitted for reimbursement would have been identical because there was no place for an affirmation that the pharmacy sought and received approval. Even taking the scheme as factual, the court held that the issue was a regulatory violation, not a false claim for payment.
The court also held the government failed to plead the auto-refill scheme with sufficient particularly. The government provided a single, allegedly false, claim for payment, but failed to contextualize or demonstrate how this single data point plausibly indicated a broader scheme. For example, while the government identified both legitimate and generic disclosure notes, it did not describe what constituted either a legitimate or generic note. Further, while the government relied almost exclusively on the lack of disclosure notes for given refills, it did not show that pharmacies consistently document contact regarding refills or identify any law, regulation, or Walgreens policy requiring pharmacists to include this information.
The government also failed to plead who made false notations, when they were made, or to whom instructions were given. While the government alleged Kulekowskis held a meeting during which he instructed technicians to enter false information about patient authorizations for refills, the government did not state when the meeting occurred or provide witnesses who were in attendance.
Next, the court considered the government’s allegation that the pharmacy had received back prescriptions it filled for CORE Center patients but failed to credit Medicaid for the returns. Again, the court found the government failed to plead any particular claim. Specifically, the government failed to indicate where it learned about these claims, nor the specifics details of any one of them. In fact, the government failed to show any claim had even been submitted or evidence that claims must have been submitted.
The court also dismissed the government’s claims of common law fraud, unjust enrichment, and payment by mistake. The court held the common law fraud claim failed because the government did not identify a single false statement, much less one of material fact. Therefore, the court assumed the government based its common law fraud claim on the same representations underlying its FCA claim, which had already failed.
The other claims for unjust enrichment and payment by mistake sound in Illinois state law, and the court concluded that state court was the best venue for deciding them. The court dismissed these claims without prejudice.
Next, the court considered the relators’ separate claims regarding the waiver of copayments and providing of free consultation services, in violation of federal and state anti-kickback statutes. The defendants moved to dismiss, arguing the complaint impermissibly reliee upon allegations pled on information and belief; failed to allege copayment waivers with particularity; and failed to allege the pharmacy consultations with particularity.
The court noted the relators failed to clarify whether their AKS claim rested on an express or implied false certification theory. Under an implied certification theory, the relators would have to show that the government would not have paid the claims had it known copayments were waived. The court held the relators failed to identify even one specific copayment that was allegedly waived and therefore could not satisfy Rule 9(b). While the relators argued that copayments written off as bad debt were actually waived copayments based on the source of the prescription, the court found these debts were coded as “patient responsibility,” which might or might not include copayments. Further, many of the drugs at issue in the complaint do not require copayments, and therefore the court could not assume that “patient responsibility” in relation to these drugs meant a mandatory copayment.
Further, the court noted there are cases when a pharmacy can properly waive copayments. For example, a pharmacy can waive a copayment after making a good faith determination of the patient’s inability to pay. The relators failed to allege the defendants did not make such a determination or failed to make a good faith effort to collect on bad debts. Further, the allegation itself was problematic, given that the patients were covered by Illinois Medicaid, which suggested financial need. The relators also failed to show the waivers were “advertised” in contravention of the relevant prohibitions. The court also held the relators failed to plead the who, what, when, where, and how of the alleged scheme to provide free consulting services to induce healthcare organizations to send patients to the pharmacy. Further, free consultations are allowed under certain circumstances.