Fox, Rx Loses False Claims Act Bid Against Omnicare, et al.

Repeat offender Omnicare, a nationwide pharmacy services organization, was recently pitted against Fox, Rx, a Medicare Part D program sponsor, in a False Claims Act lawsuit, alleging several counts of fraud involving government healthcare programs. Unlike the liability faced by Omnicare in several other lawsuits, it was able to avoid facing civil consequences in this particular suit. This was primarily due to the fact that United States District Court for the Southern District of New York’s judge Denise Cote categorized Omnicare’s conduct as “irrelevant” to government “disbursement decisions.”

Notwithstanding the recent victory for Omnicare in this False Claims Act case, it continues to navigate several additional False Claims Act lawsuits filed by several relators and state attorneys general, upon which we will continue to report as settlements and judgments reach resolution.

Details of Fox Rx Inc. v. Omnicare Inc. et al.

Omnicare Inc. was joined in the False Claims Act lawsuit with Neighborcare, Inc.; PharMerica Corp.; and pharmacy benefits administrator MHA Long Term Care Network. The relator, Fox Rx, Inc., was a Medicare Part D program sponsor and alleged the following counts against all four defendants:

• Defendants failed to substitute generic versions of prescription medications for the more costly brand names – a violation of a number of state laws mandating such substitution as a cost-cutting measure;
• Defendants wrongfully dispensed medications to patients past the termination date set forth in the National Drug Code. Many states have regulations prohibiting pharmacies from giving drugs to customers once the shelf life expiration date has passed.

According to the relator’s complaint, submitting claims for reimbursement to a government healthcare provider despite failing to adhere to these two rules triggered liability under the False Claims Act. With regard to the argument involving the alleged failure to provide cost-effective generic prescriptions, plaintiff analogized this misconduct as equivalent to overcharging the government for services. Similarly, plaintiff alleged that by submitting an invoice for reimbursement of expired drugs, defendants were falsely asserting the medications were covered under the government programs when, in fact, they were not.

District Court Disagrees

Judge Cote disagreed with the relator’s assertions, holding that the pharmacies’ non-compliance with state regulations that are “irrelevant to the government’s disbursement decisions” do not qualify as a false certification under the tenets of the False Claims Act. More specifically, the court held that the relator had failed to identify a federal statute or regulation applicable to the situation that conditioned reimbursement of these drugs on either of the two factors listed in the complaint.

The court distinguished between statutory compliance as a condition for government reimbursement, versus statutory compliance as a condition for participation in the healthcare program altogether – the latter being an actionable underlying condition possibly triggering False Claims Act liability.

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