Justia Government Contracts Opinion Summaries

The case involves Vanda Pharmaceuticals, a drug manufacturer, and the Centers for Medicare & Medicaid Services (CMS). Vanda challenged a 2020 regulation by CMS that expanded the definition of a "line extension" drug under the Medicaid Drug Rebate Program. This program requires drug manufacturers to reimburse Medicaid if they increase their prices faster than inflation. A "line extension" drug, which is a new formulation of an existing drug, can also be liable for price increases of the original drug. Vanda argued that the regulation expanded the definition of a line extension beyond what the Medicaid statute permitted.Previously, the district court granted summary judgment to CMS, disagreeing with Vanda's argument. The court held that the agency's regulation was within the bounds of the Medicaid statute.The United States Court of Appeals for the Fourth Circuit affirmed the district court's decision. The court found that the agency's definitions of "line extension" and "new formulation" were within the Medicaid statute's ambit. It also held that the agency's interpretation of the oral-solid-dosage-form requirement was not contrary to law. The court rejected Vanda's argument that the agency's rulemaking process was arbitrary and capricious, finding that the agency had reasonably considered the relevant issues and explained its decision. View "Vanda Pharmaceuticals, Inc. v. Centers for Medicare & Medicaid Services" on Justia Law

Former employees of Alternatives, a for-profit hospice provider, sued under the False Claims Act, 31 U.S.C. 3729, alleging that Alternatives submitted claims for Medicare reimbursement despite inadequate documentation in the patients’ medical records supporting hospice eligibility, under 42 C.F.R. 418.22(b)(2). For a patient to be eligible for Medicare hospice benefits, and for a hospice provider to be entitled to reimbursement, a patient must be certified as “terminally ill.” The district court granted Alternatives summary judgment based on lack of materiality, finding “no evidence” that Alternatives’ insufficiently documented certifications "were material to the Government’s decision to pay.” The court reasoned that “[t]he Government could see what was or was not submitted” yet never refused any of Alternatives’ claims, despite the inadequacy or missing supporting documentation or where compliance was otherwise lacking.The Third Circuit vacated. When a government contractor submits a claim for payment but fails to disclose a statutory, regulatory, or contractual violation, that claim does not automatically trigger liability. The Act requires that the alleged violation be “material” to the government’s decision to pay. The Supreme Court has identified factors to assist courts in evaluating materiality. In this case, the court based its decision principally on the government’s continued payments after being made aware of its deficient documentation, overlooking factors that could have weighed in favor of materiality— and despite an open dispute over the government’s “actual knowledge.” View "Druding v. Care Alternatives" on Justia Law

President Biden invoked his authority under the Federal Property and Administrative Services Act of 1949 (“Procurement Act”) to direct federal agencies to include in certain contracts a clause requiring covered contractor employees to follow COVID-19 safety protocols, including vaccination requirements, in order for employees to be eligible to work on federal government projects. Plaintiffs sued to enjoin the vaccination mandate. This lawsuit revolved around four documents that comprise the Contractor Mandate: the Executive Order, the Task Force Guidance, the Office of Management and Budget Determination, and the Federal Acquisition Regulatory Council Guidance. The district court granted a permanent injunction against the Contractor Mandate, effective in any contract that either involved a party domiciled or headquartered in Arizona and/or was performed “principally” in Arizona.   The Ninth Circuit reversed the district court’s order granting a permanent injunction and dissolved the injunction. First, the panel held the Major Questions Doctrine—which requires that Congress speak clearly if it wishes to assign to an agency decisions of vast economic and political significance—did not apply. Second, the panel held that even if the Major Questions Doctrine applied, it would not bar the Contractor Mandate because the Mandate is not a transformative expansion of the President’s authority under the Procurement Act. Third, the panel held that the Contractor Mandate fell within the President’s authority under the Procurement Act. Fourth, the panel held that the nondelegation doctrine and state sovereignty concerns did not invalidate the Contractor Mandate. Finally, the panel held that the Contractor Mandate satisfied the Office of Federal Procurement Policy Act’s procedural requirements. View "KRISTIN MAYES, ET AL V. JOSEPH BIDEN, ET AL" on Justia Law

The False Claims Act imposes civil liability for “knowingly present[ing], or caus[ing] to be presented, a false or fraudulent claim [to the government] for payment or approval,” 31 U.S.C. 3729(a)(1)(A). Individuals with knowledge of false claims may bring private qui tam lawsuits, on behalf of the government. The Act covers claims resulting from a violation of the Anti-Kickback Statute, 42 U.S.C. 1320a-7b(g), which prohibits medical providers from making referrals “in return for” “remuneration.”Oaklawn Hospital is in Marshall, Michigan, which had two ophthalmologists. Oaklawn extended one of those doctors (Martin) a tentative offer to work at the hospital after hearing that the other doctor (Hathaway) planned to move his surgeries elsewhere. Hathaway told the hospital’s CEO that he wanted to continue working with Oaklawn and that Oaklawn hiring Martin would be the “death knell” of his practice. Oaklawn’s Board ultimately did not hire Martin.Martin filed a qui tam action, alleging an illegal fraudulent scheme under the Anti-Kickback Statute and that claims for Medicare and Medicaid reimbursement resulting from the kickbacks violated the False Claims Act. The Sixth Circuit affirmed the dismissal of the suit, which essentially argued that Oaklawn’s rejection of Martin’s employment in return for Hathaway’s commitment to continue sending surgery referrals violated the Anti-Kickback Statute. The Martins have not plausibly alleged causation; the alleged scheme did not change anything. When Oaklawn decided not to establish an internal ophthalmology line, it simply left things where they were. View "Martin v. Hathaway" on Justia Law

Drug makers participating in Medicare or Medicaid must offer their drugs at a discount to certain “covered entities,” which typically provide healthcare to low-income and rural individuals, 42 U.S.C. 256b, 1396r-8(a)(1), (5) (Section 340B). Initially, few covered entities had in-house pharmacies. A 1996 HHS guidance stated that covered entities could use one outside contract pharmacy each; a 2010 HHS guidance stated that covered entities could use an unlimited number of contract pharmacies. Drug makers thought that contract pharmacies were driving up duplicate discounting and diversion and adopted policies to limit any covered entity’s use of multiple contract pharmacies. A 2020 HHS Advisory Opinion declared that Section 340B required drug makers to deliver discounted drugs to an unlimited number of contract pharmacies.In 2010, Congress told HHS to establish a process for drug makers and covered entities to resolve Section 340B–related disputes. In 2016, HHS issued a notice of proposed rulemaking and accepted comments on the proposed ADR Rule. HHS subsequently listed the proposed rule as withdrawn. In 2020, HHS stated that it had just “paus[ed] action on the proposed rule,” responded to the four-year-old comments. and issued a final ADR Rule.Drug companies sued. The Third Circuit held that Section 340B does not require drug makers to deliver discounted drugs to an unlimited number of contract pharmacies. HHS did not violate the APA by purporting to withdraw the proposed ADR Rule before later finalizing it. View "Sanofi Aventis US LLC v. United States Department of Health and Human Services" on Justia Law

The 1949 Federal Property and Administrative Services Act concerns the purchase of goods and services on behalf of the federal government, 40 U.S.C. 101. In November 2021, the Safer Federal Workforce Task Force, citing the Act, issued a “Guidance” mandating that employees of federal contractors in covered contracts with the federal government become fully vaccinated against COVID-19. Ohio, Kentucky, and Tennessee and Ohio sheriffs’ offices challenged the mandate. The district court enjoined its enforcement in the three states and denied the government’s request to stay the injunction pending appeal.The Sixth Circuit denied relief in January 2022 and, a year later, affirmed. The Property Act does not authorize the President to issue directives that simply “improve the efficiency of contractors and subcontractors.” The plaintiffs are likely to succeed in showing that the President exceeded his authority in issuing the mandate. The plaintiffs are likely to lose valuable government contracts and incur unrecoverable compliance costs if the mandate is not enjoined. The public interest “lies in a correct application” of the law. Because an injunction limited to the parties can adequately protect the plaintiffs’ interests while the case is pending, the district court abused its discretion in extending the preliminary injunction’s protection to non-party contractors in the plaintiff states. View "Commonwealth of Kentucky v. Biden" on Justia Law

Plaintiff Vermont Human Rights Commission, on behalf of plaintiff Latonia Congress, appealed a trial court’s decision granting summary judgment to defendant Centurion of Vermont LLC on the Commission’s claims of discrimination under the Vermont Public Accommodations Act (VPAA). Congress was incarcerated at a prison owned and operated by the Vermont Department of Corrections (DOC). The DOC contracted with Centurion to provide all medical services for inmates at the prison. Under the previous provider, Congress was seen by an audiologist, who determined that she had substantial bilateral hearing loss, and she was given hearing aids for both ears. In December 2016, Congress reported that the hearing aids were not working, and Centurion planned to send them “to Audiology for check of functioning.” Later in December 2016, a doctor examined Congress’s ears and did not find any indication of an obstruction or other problem that might be affecting her hearing. Congress delivered her hearing aids to the medical unit to be sent out for testing. They were returned to her without having been tested. The record established that no one knew what happened to the hearing aids during that time; they were apparently misplaced. Through 2017 and early 2018, Congress attempted numerous times to obtain functioning hearing aids. Because Congress was deemed “functional” for some period of time despite her reported difficulty in hearing conversations, she was not eligible for hearing aids under Centurion’s policies. Eventually, in March 2018, an audiologist concluded Congress had moderate to severe bilateral hearing loss, which was worse in one ear, and recommended hearing aids. She was provided with one hearing aid in April 2018, which improved her hearing in that ear. Congress was released from prison in October 2019. In March 2020, the Commission filed a complaint against Centurion, the DOC, and other state defendants, alleging, as relevant here, that they discriminated against Congress in violation of the VPAA by failing to provide her with functioning hearing aids and thereby denying her equal access to certain benefits and services offered at the prison. Finding no reversible error in the grant of summary judgment in favor of Centurion, the Vermont Supreme Court affirmed. View "Human Rights Commission v. Vermont, et al." on Justia Law

Plaintiffs worked for MBO and Trustmark, which provide medical billing and debt‐collection services to healthcare providers. After they raised concerns about their employers’ business practices, the plaintiffs were fired. They sued MBO, Trustmark, and MBO's client, the University of Chicago Medical Center (UCMC), under the False Claims Act, 31 U.S.C. 3729. Regulations specify that Medicare providers seeking reimbursement for “bad debts” owed by beneficiaries must first make reasonable efforts to collect those debts. The plaintiffs claim that UCMC knowingly avoided an obligation to repay the government after it effectively learned that it had been reimbursed for non-compliant debts; MBO and Trustmark caused the submission of false claims to the government. Each plaintiff also claimed retaliation.The Seventh Circuit affirmed the dismissal of the complaint, in part. The district court properly dismissed the claim against UCMC, which neither had an established duty to repay the government nor acted knowingly in avoiding any such duty. The direct false claim against MBO was also correctly dismissed. The complaint failed to include specific representative examples of non-compliant patient debts, linked to MBO, for which reimbursement was sought. The court reversed in part; the complaint includes specific examples of patient debts involving Trustmark. Two plaintiffs alleged facts that support the inference that they reasonably believed their employers were causing the submission of false claims. View "Sibley v. University of Chicago Medical Center" on Justia Law

Hospitals provided emergency medical services to members of the county’s health plan, which is licensed and regulated by the state Department of Managed Health Care under the Knox-Keene Health Care Service Plan Act, Health & Saf. Code 1340. The county reimbursed the Hospitals for $28,500 of a claimed $144,000. The Hospitals sued, alleging breach of an implied-in-fact or implied-in-law contract. The trial court rejected the county’s argument that it is immune from the Hospitals’ suit under the Government Claims Act (Gov. Code 810).The court of appeal reversed. The county is immune from common law claims under the Government Claims Act and the Hospitals did not state a claim for breach of an implied-in-fact contract. The county does not contest its obligation to reimburse the Hospitals for the reasonable and customary value of the services; the issue is what remedies may be pursued against the county when the reasonableness of the reimbursement is disputed. The Knox-Keene Act provides alternative mechanisms to challenge the amount of emergency medical services reimbursements. A health care service plan has greater remedies against a private health care service plan than it does against a public entity health care service plan, a result driven by the Legislature broadly immunizing public entities from common law claims and electing not to abrogate that immunity in this context. View "County of Santa Clara v. Superior Court" on Justia Law

Plaintiff, a hospice provider, challenges the Centers for Medicare and Medicaid Services (“CMS”) methodology, contending that it violates both the Medicare statute and the Budget Control Act and that CMS did not follow the required administrative procedures for adopting it.According to Plaintiff, the sequestration methodology violated the statute and the regulation by adding back the sequestration reduction withheld from the preliminary disbursements into the equation, such that — for overpayment purposes — funds the providers did not actually receive were being counted against them. Plaintiff contends that CMS was required to use the net payments methodology instead of the sequestration methodology.The court held that the regulations and guidance do not support Plaintiff’s contention that the statute unambiguously requires the net payments methodology. Reasoning that section 1395f(i)(2)(A) does not mandate any one methodology for applying the aggregate cap. Further, the plain meaning of the statute gives no instruction as to how overpayments should be calculated, the court concludes the statute is “silent . . . with respect to the specific issue” of what methodology CMS must use in applying the aggregate cap. Further, because the Secretary’s chosen methodology comports with the statutory text, purpose, and operation, Plaintiff has not shown that the Board’s decision was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” Thus, the court affirmed the district court’s grant of summary judgment to the Secretary and denial of summary judgment to Plaintiff. View "Gentiva Health Services, Inc. v. Becerra" on Justia Law