A federal court in Massachusetts has ruled that drug makers must defend a "whistleblower" action by a healthcare provider even though the alleged fraudulent price reports have been the subject of government reports and related multidistrict litigation for several years. The provider claimed that 15 drug manufacturers violated the False Claims Act when they reported average wholesale prices (AWP) for more than 1,400 generic drugs that were much higher than the prices providers actually paid. Because Medicaid reimbursement was based on the published AWP, Medicaid overpaid for the drugs. The allegations covered a 16-year period and involved millions of transactions.
Public disclosure
A private party who sues under the False Claims Act must be an original source of the information; it may not have learned of the fraud through the news media, other litigation, or reports of government agencies. The drug makers argued that the provider was not an original source of the information because the inflated prices had been the subject of reports by the HHS Inspector General in 1997.
The court agreed that the 1997 report contained some of the general information alleged in the complaint. However, the report did not discuss the actual prices charged by the manufacturers and the false AWPs; it described average differences only. The provider was the original source of the information concerning actual fraudulent transactions: the prices that specific manufacturers charged to the provider for specific drugs and the AWPs reported by those manufacturers.
Payment by the federal government
The drug makers also contended that there were no false claims submitted to the federal government because the state Medicaid programs actually paid the providers for the drugs. The court rejected that argument The federal government reimburses the state agencies for a percentage of their Medicaid expenditures. The drug makers knew that state agencies would submit reports of their spending for each drug and that the federal government would necessarily pay a portion of the cost to the state. The court also noted that Congress clearly intended, and nearly all the courts that considered the question had ruled, that Medicaid claims are submitted to the federal government for purposes of False Claims Act litigation.
Other defenses
The manufacturers also argued that claims or reports submitted before 2002 were barred by the six-year statute of limitations because they had not been sued until 2008. The court rejected this argument as well. The provider's case was first brought in 2000, and some of the defendants had been added before 2008. However, the provider could not add the last group of drug makers to the case until the federal government decided not to proceed.
The court had previously ruled in the multidistrict litigation (see ¶302,119) that amendments to the government's complaint "relate back," that is, they are considered to have been filed on the date the private party originally filed the False Claims Act case identifying the drug, the maker, and the overall fraudulent scheme. Thus, the manufacturers were aware of the claims against them even if the National Drug Code number for every dosage or form of a drug was not listed.
The court also ruled that the statute of limitations was tolled, or suspended, while the government was investigating the case and the complaint was under seal.
United States ex rel. Ven-A-Care of the Florida Keys, Inc. v. ActavIs Mid Atlantic L.L.C., D. Mass., Oct. 2, 2009, ¶303,142
For more information on this and related topics, consult the CCH® Medicare and Medicaid Guide.
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