Federal Court Dismisses $680 Million FCA Suit

Federal Court Dismisses $680 Million FCA Suit

On July 23, a Maryland federal judge, Ellen L. Hollander, dismissed a $680 million False Claims Act (FCA) suit that was previously revived by the US Supreme Court. The suit accused drugmaker Allergan of overcharging Medicaid by failing to aggregate available discounts for its drugs. However, Judge Hollander determined that the whistleblower still had not shown any deliberate wrongdoing by the company.

In 2023, the US Supreme Court established that the scienter requirement under the FCA required that a defendant’s subjective beliefs about whether their claims were false must be considered. Proving scienter under the FCA requires showing that a defendant had knowledge of the falsity of their claims or acted with deliberate ignorance or reckless disregard of the truth. Here, relator Deborah Sheldon failed to show that Allergan predecessor, Forest Laboratories LLC, knew that they overcharged Medicaid by more than $680 million by failing to aggregate all available discounts in the “best price” it offered for its drugs.

According to Judge Hollander, the Medicaid Drug Rebate statute and Centers for Medicare and Medicaid Services guidance and regulation were ambiguous regarding the calculation of “best price.” Due to that ambiguity, Judge Hollander ruled that Forest Laboratories had not acted with scienter.

The case is Sheldon v. Forest Laboratories, LLC, No. 1:14-cv-02535 (D. Md. Aug. 11, 2014).

Doctor Defrauds Health Care Programs With Over $5.4 Million in Losses

On July 23, a Louisiana physician, Adrian Dexter Talbot, was convicted of conspiring to illegally distribute over 1.8 million doses of Schedule II controlled substances in his medical clinic, Medex Clinical Consultants.

According to court documents, Talbot ran a medical clinic that accepted cash payments for individuals seeking Schedule II controlled substances such as oxycodone and morphine. Talbot ignored signs of drug abuse, pre-signed prescriptions for patients he did not see or examine, and falsified patient records. With Talbot’s knowledge, patients then filled their prescriptions using their insurance benefits resulting in payers, including both federal health care programs and commercial payers, being fraudulently billed for medically unnecessary prescriptions and for prescriptions that were written without appropriate patient examinations. The fraudulent prescriptions resulted in over $5.4 million in fraudulent billing.

A federal jury convicted Talbot of one count of conspiracy to unlawfully distribute and dispense controlled substances, four counts of unlawfully distributing and dispensing controlled substances, one count of maintaining a drug-involved premises, and one count of conspiracy to commit health care fraud. Talbot faces a maximum penalty of 10 years in prison for conspiracy to commit health care fraud and a maximum penalty of 20 years in prison for each of the other counts.

Read the US Department of Justice (DOJ) press release here.

DaVita Pays Over $34 Million for FCA Violation

DaVita Inc. has agreed to pay over $34 million to resolve allegations that it violated the FCA by paying kickbacks to induce referrals to its subsidiary pharmacy, DaVita Rx, which provided services for dialysis patients, and by paying kickbacks to physicians to induce referrals to DaVita dialysis centers.

The Anti-Kickback Statute prohibits anyone from offering or paying, directly or indirectly, any remuneration to induce referrals of patients or of items or services covered by Medicare, Medicaid, and other federally funded programs. DaVita allegedly paid kickbacks to a competitor to induce referrals to DaVita Rx in exchange for the purchase of dialysis products from the competitor and the acquisition of certain European dialysis clinics. DaVita also allegedly paid improper remuneration to a nephrology practice and other physicians in certain vascular centers to induce referrals to its dialysis clinics. The alleged improper remuneration included the provision of management services to vascular access clinics owned by physicians for which DaVita did not collect management fees, providing the members of a large nephrology practice with a right of first refusal to staff medical director positions at new dialysis clinics opening near the practice, and paying the nephrology practice for medical director services despite the practice not actually providing a medical director for the dialysis clinics.

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the FCA by Dennis Kogod, a former chief operating officer of DaVita Kidney Care. 

Read the DOJ press release here.