Judge Dismisses FCA Claims Against Compounding Pharmacy And Private Equity Firm Owner But Allows The Government To Amend
Last week, a U.S. district court judge in the Southern District of Florida upheld a magistrate judge's decision to dismiss False Claims Act (FCA) allegations against a compounding pharmacy, its private equity firm owner, and two individuals. As discussed in a previous post, DOJ filed its complaint in intervention last February against the pharmacy, Patient Care America (PCA); its private equity backer, Riordan Lewis & Haden, Inc.; and two individual executives. The government alleged that the parties engaged in an illegal kickback scheme that resulted in the submission of false claims to TRICARE for expensive compounded drugs. This case is reportedly the first in which the federal government intervened against a private equity firm owner.
The motions to dismiss filed by defendants were referred to a magistrate judge who issued a Report and Recommendations in November 2018. Although the magistrate judge upheld two of the government's claims, she recommended dismissal of the FCA allegations. The U.S. district court judge agreed.
The court's decision to dismiss the FCA claims turned on the government's failure to adequately allege FCA liability based on violations of the federal Anti-Kickback Statute (AKS). Quoting an earlier case, the court made clear that liability under the FCA does not arise solely from the "disregard of Government regulations or improper internal policies, unless, as a result of such acts, the provider knowingly asks the Government to pay amounts it does not owe." In other words, simply alleging a violation of the AKS is not enough to state a claim under the FCA; FCA liability arises from the submission and payment of a false claim and the express or implied false certification of compliance therewith.
The court held that the government failed to plead with the level of particularity required to sustain a theory of express or implied certification under the FCA. The government attempted to show that PCA's provider agreement with...
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