New Jersey District Court Denies PharMerica’s Motion to Dismiss in Ongoing Omnicare Case

As you may recall, our law firm has maintained a steadfast involvement in the False Claims Act case against pharmacy services giants Omnicare, Inc. and Pharmerica, representing pharmacist relator Marc Silver in his quest to expose the defendant’s ongoing fraud committed against Medicare and Medicaid. In a recent order entered by District Judge Hillman, the defendant’s recent motion to dismiss was denied in part, granting the motion only as to the defendant’s statute of limitations claims for federal False Claims Act allegations occurring prior to March 4, 2005. In today’s post, we review the background details of the case, as well as discuss the court’s reasoning in denying the defendant’s bid to dismiss the case. In tomorrow’s post, we will look at the flourishing Foglia standard and how it has taken hold of the federal Third Circuit.

Background of United States ex rel. Silver, et al. v. Ominicare, Inc. et al.

The allegations against defendant Omnicare, Inc. involve a type of healthcare fraud known as “swapping.” More specifically, Omnicare – which provides prescription drugs to nursing homes and long-term care facilities – induced these facilities to refer Medicaid and Medicare patients by offering “commercially unreasonable, below fair-market value” prices for Medicare Part A patients in exchange for the opportunity to offer identical drugs at much higher, market-driven rates to Medicaid and Medicare Part D patients. The nursing homes and other facilities are paid on a per diem basis for patients covered by Medicare Part A. This means that no matter how many drugs or services are used by the patient, the facility still receives the same daily rate for the patient. Drugs provided to patients under Medicare Part D, however, are covered on a fee for service basis, meaning the facilities are reimbursed for however much they expend on each individual drug. Pursuant to this plan, facilities were offered deep discounts on some drugs, discounted “average wholesale prices” for other drugs, and completely free drugs for the facilities’ Medicare Part A patients. In return, Omnicare was given the opportunity to bill high prices on drugs covered by Medicare part D. Allegedly, this scheme began in 1998 and still continues. The allegations are centered on kickback schemes between Omnicare and Pharmerica and facilities in California and New Jersey.

PharMerica’s Claims in Its Motion to Dismiss

PharMerica – a named defendant in the suit against Omnicare – has raised several claims in its motion to dismiss, namely:

  • The relator failed to meet the heightened pleading standards set forth by Rule 9(b) of the Federal Rules of Civil Procedure
  • Complaint fails to set forth requisite facts to meet a claim of conspiracy
  • Facts do not establish that PharMerica should face liability for the acts or omissions of defendants Kindred or Chem Rx
  • The statute of limitations prohibits relator’s claims
  • State False Claims Act allegations should be dismissed.

Defendant PharMerica filed its motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), which requires a court to dismiss a case if no actual legal claim is set forth by the alleged facts. The motion is always considered in a light most favorable to the non-moving party (here, the relator).

Court’s Analysis of PharMerica’s Claims

The court began its analysis with the issue currently plaguing the federal Circuit Courts: pleading standards under Rule 9(b) in False Claims Act cases. As you may recall, the jurisdictions are split somewhat evenly on this issue, with some courts holding that a strict reading of Rule 9(b) requires a relator to submit an invoice or document for each and every instance of alleged fraud. Other courts apply a more lenient standard, holding that general assertions of fraud supported by credible and thorough evidence will suffice. Here, the court relied on a recent precedential holding in the case Foglia v. Renal Ventures Management, LLC, wherein the Third Circuit held that “sufficient facts to establish a plausible ground for relief” must be included in the complaint.

We will cover more on the Foglia standard tomorrow; however, the court was not convinced by the defendant’s assertions – and declined to dismiss the case on these grounds.

Second, the court declined to dismiss the conspiracy charge, holding that the relator “has adequately pled a claim for conspiracy,” pointing to relator’s assertions that PharMerica conspired with at least one other entity to commit fraud and one or more actors allegedly committed some sort of act in furtherance of the agreement.

With regard to PharMerica’s responsibility for Kindred and Chem Rx, the court held that a determination on this issue is beyond the scope of a motion to dismiss and would therefore withstand the defendant’s 12(b)(6) attempts. The court held likewise with regard to PharMerica’s attempt to have all state FCA claims dismissed.

Lastly, the court considered PharMerica’s statute of limitations claim. Under the False Claims Act, there is a six year statute of limitations, or time limit, for parties to successfully bring an action. Accordingly, the court granted PharMerica’s statute of limitations claim with regard to any allegedly fraudulent act occurring prior to March 4, 2005.

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By | 2018-09-13T13:59:33+00:00 October 20th, 2014|Omnicare|