Prominent U.S. Pharmacy Escapes Price Inflation Lawsuit; Reveals Need for Qui Tam Attorneys

The False Claims Act is a federal statute enacted to prevent and punish fraud in the use of government funds. In other words, it works as a protection for taxpayers and is pivotal in the recovery of billions of dollars each year. Generally speaking, any private individual with firsthand knowledge of fraud can file a lawsuit against the alleged perpetrator and, if successful, can receive up to 30 percent of the final payout. However, there are several exceptions to this rule, namely the “public disclosure doctrine,” which eliminates the possibility of a federal lawsuit if the information serving as the basis for the action is that of common knowledge or widespread dissemination.

Under the public disclosure doctrine, a qui tam defendant can escape liability if the information relied upon by the plaintiff is readily discoverable by a member of the public. The FCA is only applicable when a plaintiff has decided to come forward with original information derived from firsthand exposure to fraudulent activity. Information derived from public filings, lawsuits, legislative hearings, previous litigation or even a federal investigation is disqualified from a whistleblower lawsuit and will result in a dismissal of the case.

U.S. ex. rel. David Morgan et al. v. Express Scripts Inc. et al.

The public disclosure doctrine was recently applied in a case involving several prominent pharmacy services companies, including Express Scripts, Amerisource Bergen Corp., and CVS Caremark Corp. The allegations were filed by a pharmacist pursuant to a whistleblower lawsuit commenced in the U.S. District Court of New Jersey. In his allegations, the pharmacist asserted that the defendants used over-inflated wholesale drug prices to perpetrate a multi-million dollar scheme against Medicaid, resulting in vast overbilling and unlawful profits. The plaintiff further alleged that this scheme was made possible by a “loose alliance of pharmacy benefit managers, data companies and drug makers.”

The defendants asserted in their response that the information upon which the plaintiff relied to advance his claim could be found in a highly-publicized federal investigation performed in the 1990’s involving various drug manufacturers accused of similar conduct. Defendants further argued that the information Mr. Morgan used was not derived from firsthand knowledge, personal witness or participation in the events, rather “[pure] speculation and conjecture.”

Court’s Dismissal

District Court Judge Dennis M. Cavanaugh agreed with the defense, dismissing the complaint under the public disclosure doctrine. In its holding, the Court reasoned that the facts of the suit had “already been revealed through a federal investigation and previous litigation.” Defendants’ reiterated this point by asserting the suit was precisely the type of litigation the public disclosure doctrine is designed to prevent.

Importance of Original Information

If you suspect possible fraud in your place of employment, do not hesitate to come forward to a reputable and confidential whistleblower attorney. Your attorney will help make certain, however, that your complaint is derived from your firsthand experience or exposure to the fraud. If the information you hold was previously disclosed in prior litigation, even if you were not aware, the court may hold that the public disclosure doctrine bars the action.