While the Trump Administration’s antitrust policy is still developing, and most believe it will provide for less enforcement than antitrust policy under the Obama Administration, the Federal Trade Commission announced on Friday, March 31, that it has no intention of letting up on the healthcare and pharmaceutical sectors, where the FTC has been increasingly active over the past few years. In 2016, the FTC challenged the mergers of hospitals/health systems in Illinois and Pennsylvania, and initiated actions to protect pharmaceutical price competition; early 2017 has been no different.
Thus, while the Trump Administration’s antitrust policy unfolds, and it may be less strict than the antitrust policy of the prior administration, healthcare and pharmaceutical industry participants should stay vigilant about antitrust compliance because the FTC intends to remain focused on competition in those sectors.
In an important decision for providers facing a lawsuit alleging violations of the False Claims Act, the U.S. District Court for the Middle District of Florida, in U.S. ex rel. Pelletier v. Liberty Ambulance Service, Inc., Case No. 3:11-cv-587-J-32MCR (Middle District of Florida, Jacksonville Division), dismissed the government’s complaint intervening in a qui tam action that alleged that Liberty Ambulance Service, among other providers that settled with the government prior to the dismissal, submitted false claims to Medicare and Medicaid for ambulance services that were never provided, on the basis that the government’s complaint failed to satisfy the heightened pleading requirements under Federal Rules of Civil Procedure 8 and 9.
The Court’s decision is significant because the government attached to its complaint affidavits of current and former employees of Liberty and a dispatcher, along with other materials, suggesting that falsified reports were submitted to Liberty that would be payable by Medicare and Medicaid, but, as the Court found, “the allegations stop short of describing what happened once the run reports were submitted to the Liberty office for processing.” The Court’s decision hinged on the lack of any evidence pertaining to the actual billing process employed by Liberty. In fact, the affidavit of the person who claimed the most familiarity with that process, did not claim to have witnessed the submission to the government of any actual false claims.
Although the dismissal was without prejudice to the government amending the complaint to provide greater particularity, the decision is an important example for providers facing False Claims Act claims of how the heightened pleading requirements under FRCP 8 and 9 may strengthen their defense.
A per se violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, generally requires an agreement among horizontal competitors that unreasonably restrains trade. To withstand a motion to dismiss, a Section 1 plaintiff must allege facts that suggest direct of evidence of an agreement among the defendants, as opposed to alleging facts that merely are consistent with parallel conduct. These principles have been referred to by some courts as creating a heightened pleading standard for Section 1 claims.
In Arapahoe Surgery Center, LLC, et al. v. Cigna Healthcare, Inc., et al., 2015 U.S. Dist. Lexis 28375 (D. CO.), the Colorado District Court determined that the plaintiffs’ allegations of a group boycott were sufficient to meet the pleading requirements under Section 1, and therefore denied a motion to dismiss filed by three insurance carrier defendants. The specificity of the factual allegations concerning the agreement among the defendants, and the acts in furtherance thereof, underscore the importance of antitrust compliance in the healthcare and health insurance industries. Continue reading Specific Facts Suggest Hospitals and Insurers Agreed to Group Boycott
A recent decision in the U.S. District Court for the Southern District of New York provides fair warning to qui tam relators who assert erroneous claims under the False Claims Act (“FCA”) that they could be hit with legal fees and expenses pursuant to 31 U.S.C. § 3730, which permits such an award “upon a finding that the . . . claims were objectively frivolous, irrespective of plaintiff’s subjective intent.” Mikes v. Straus, 274 F.3d 687, 705 (2d Cir. 2001).
On December 1, 2014, in U.S., et al., ex rel. Fox Rx, Inc., 1:12-cv-00275, defendant Managed Health Care Associates Long Term Care Network, Inc. (“MHA”), was awarded attorneys’ fees and expenses because the relator’s, Fox Rx, Inc.’ (“Fox”), claim that MHA, which negotiates reimbursement rates, among other things, on behalf of a network of pharmacies, allegedly (i) failed to substitute generic drugs for named brand drugs, and (ii) dispensed drugs beyond their termination date, was objectively frivolous given that the plain language of the very agreement Fox attached to its second amended complaint demonstrated that MHA did not itself dispense drugs, and exercised no control or supervision of its network pharmacies’ dispensing. Continue reading Fees and Costs Awarded to False Claims Act Defendant
On January 2, 2015, the U.S. District Court for the Central District of California threw out claims that Walgreens pharmacy violated the federal and California false claims acts on the basis that the plaintiff failed to meet the applicable stringent pleading requirements.
In Irwin v. Walgreens, 2:13-cv-08473, a whistleblower/Relator contended that Walgreens cheated Medicare and Medi-Cal out of millions of dollars by establishing schemes to bill those government healthcare programs for prescriptions that were never picked up by patients, rather than restocking the drugs and reversing any associated charges to the government payers. Among other things, the complaint asserted that, as demonstrated by the fact that they were not picked up by the patients, the prescriptions were not medically necessary, and therefore should not have been billed. The complaint sought money damages, including a penalty of up to $11,000 for each violation and treble damages. In September 2014, the government declined to intervene in the qui tam action. Continue reading Another Win for a False Claims Act Defendant
One arrow in the quiver for healthcare providers sued for violations of false claims and anti-kickback statutes is pressing for discovery from the whistleblower/relator, including a deposition of the relator. The failure of the whistleblower to comply with the discovery obligations could result in meaningful sanctions, including dismissal.
In Guthrie v. A Plus Home Health Care, Inc. et al, 0:12-cv-60629-WPD (S.D. FL), the relator, William Guthrie, sued a home health care provider, its seven doctors, and their spouses, alleging that the doctors and their spouses implemented a fraudulent scheme of compensation and referral payments resulting in violations of the False Claims Act, the Stark Act, and the federal Anti-Kickback Statute. Continue reading False Claims and Anti-Kickback Defendants Should Insist on Discovery from the Whistleblower/Relator