Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

United States v. Rite AID Corp.

United States District Court, E.D. Michigan, Southern Division

April 11, 2018

UNITED STATES OF AMERICA, et al., Plaintiffs, ex rel. AZAM RAHIMI, Plaintiff/Relator,
v.
RITE AID CORPORATION, Defendant.

          OPINION AND ORDER DENYING WITHOUT PREJUDICE DEFENDANT'S MOTION TO DISMISS [55] AND PERMITTING RELATOR TO FILE AMENDED COMPLAINT

          STEPHEN J. MURPHY, III UNITED STATES DISTRICT JUDGE.

         In May 2011, Relator Azam Rahimi filed his qui tam complaint against Defendant Rite Aid Corporation alleging violations of the False Claims Act (FCA) and analogous state laws. In June of 2011, the United States sought an extension to consider whether to intervene. ECF 3 (under seal). The Court granted the motion and administratively closed the case. In April 2013, the Court reopened the case only to allow Rahimi to file an amended complaint. ECF 13. Finally, in August 2016 and after more than five years of extensions requested by the Government, Rahimi filed a motion to reopen the case and set a deadline for government intervention. ECF 29. The Court conducted a sealed hearing on the motion and permitted Relator to file a second amended complaint.

         On November 18, 2016, Rahimi filed his second amended complaint. ECF 44. The Court reopened the case and set a deadline for the Government to notify the Court of its intention to intervene. ECF 45 (under seal). The United States declined to intervene. ECF 46. Rahimi served Defendant Rite Aid. Rite Aid responded to the Second Amended Complaint with a motion to dismiss. ECF 55. The Court reviewed the motion and finds that a hearing is unnecessary. E.D. Mich. L.R. 7.1(f). For the reasons below, the Court will deny without prejudice Defendant's motion to dismiss.

         BACKGROUND

         The claim here arose after Rahimi, a pharmacist, became suspicious of Rite Aid's billing practices in regard to Medicare and Medicaid beneficiaries. Through a scheme described further below, Rahimi alleges that Rite Aid violated the FCA by submitting false claims to the Government and by failing to reimburse overpayments.

         I. The Claims

         Plaintiff's Second Amended Complaint (SAC), ECF 44, contains twenty-one counts: one count for alleged violations of the FCA and twenty counts for alleged violations of various state court false claims statutes.[1] In particular, the FCA count alleges violations of 31 U.S.C. §§ 3729(a)(1)(A), (a)(1)(B), and (a)(1)(G). Those statutes impose liability on any person who:

(A): "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval;"
(B): "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim;"
(G): "knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money . . . to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money . . . to the Government[.]"

31 U.S.C. §§ 3729(a)(1)(A), (B), and (G).

         II. The Parts of the Scheme

         The alleged fraudulent scheme involved several parts, but there are three principal components: (1) Rite Aid's Rx Savings Program ("Rx Program"), (2) Medicare Part D, and (3) the Medicaid and Medicare Part D requirement that pharmacies charge government insurance programs the "usual and customary charge to the general public, " see 42 C.F.R. § 447.512(b). To help understand the scheme, the Court will briefly explain each component.

         A. The Rx Program

         Like many major pharmacies, Rite Aid offers hundreds of generic prescriptions at reduced prices through a prescription discount program. ECF 44-1, PgID 473. The Rx Program provides prescriptions at heavily reduced prices: a 30-day supply of certain generic drugs cost $8.99 and a 90-day supply of those drugs cost $15.99. Id. Enrollment in the Rx Program is free, and any person can join it-with one exception. The Rx Program's reduced prices do not extend to "[p]rescriptions paid for in whole or in part by publicly funded health care programs[.]" Id.

         B. Medicare Part D

         Medicare Part D is a federal, voluntary prescription drug benefit program available to citizens eligible for Medicare. The Centers for Medicare and Medicaid Services ("CMS") oversees Medicare Part D. ECF 44, at PgID 426. CMS contracts with private insurance companies ("Part D Sponsors") that "compete for the opportunity to manage Part D beneficiaries' claim submissions and payment processes." United States ex rel. Garbe v. Kmart Corp., 824 F.3d 632, 635 (7th Cir. 2016), cert. denied, 137 S.Ct. 627 (2017). Part D Sponsors and their subcontractors then "work directly with retail pharmacies to provide prescriptions to Part D beneficiaries." Id. Part D Sponsors negotiate with the pharmacies to determine how much the pharmacy will be paid for the drugs they dispense to Medicare enrollees. ECF 44 at 447.

         C. Usual and Customary Charge

         When a pharmacy dispenses prescription drugs to Medicare enrollees, it submits a claim for payment from the federal government, through Part D sponsors and intermediaries with which it has contracted. CMC's payments for drugs must not exceed a provider's "usual and customary charges to the general public, " or, "U&C." 42 C.F.R. § 447.512(b). To comply with the limitation, "state Medicaid programs have enacted rules that require pharmacies to bill Medicaid no more than their [U&C]." ECF 44, PgID 429. States' Medicaid programs define U&C differently, but with the exception of California, all of the Relevant States' programs specifically require pharmacies to disclose the U&C in a designated field when billing the state Medicaid program. See Id. at 431-45.

         III. The Alleged Fraudulent Scheme

         In the alleged scheme, Rite Aid charged Medicare Part D and state Medicaid programs prices that "significantly exceed[ed] the prices that Rite Aid has routinely offered customers through its 'Rx Savings' discount program." ECF 44, PgID 424. Because the misrepresentations would tend to cause CMS to issue inflated reimbursements, Relator ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.