Articles Posted in US Court of Appeals for the Third Circuit

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Silver’s qui tam action, filed under the False Claims Act (FCA), 31 U.S.C. 3729–33, alleged that PharMerica, which owns and operates institutional pharmacies serving nursing homes, unlawfully discounted prices for nursing homes’ Medicare Part A patients (reimbursed by the federal government to the nursing home on a flat per-diem basis) in order to secure contracts to supply services to patients covered by Medicare Part D and Medicaid (reimbursed directly to the pharmacy by the government on a cost basis) in the same nursing homes--a practice called swapping. The district court dismissed, based on the FCA’s public disclosure bar. The Third Circuit reversed. The district court improperly determined that documents publicly describing the generalized risk of swapping in the nursing home industry served to bar his specific claim, which depended on non-public information that PharMerica was actually engaging in swapping in specific contracts. The district court also erred in concluding, on the basis of Silver’s testimony, that he relied upon certain publicly available information to reach his conclusion and that the information itself disclosed the fraud, without independently determining that the relevant public document did, in fact, effectuate such a disclosure. View "Silver v. Omnicare Inc" on Justia Law

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From 1996-2011 Pennsylvania claimed the costs of a training program, the Pennsylvania Restraint Reduction Initiative, “to train long-term care facility staff in the use of alternative measures to physical and chemical restraints,” as administrative costs under its Medicaid program, 42 U.S.C. 1396b(a)(7) . The Centers for Medicare & Medicaid Services (CMS) reimbursed Pennsylvania for about $3 million. After an audit, CMS sought a return of the money on the ground that funds spent on training programs are not reimbursable as administrative costs under Medicaid. CMS relied heavily on a 1994 State Medicaid Director Letter. The Appeals Board, district court, and Third Circuit rejected the state’s arguments that the 1994 Letter was an invalid substantive rule, that the Letter’s text does not exclude the training costs from reimbursement, that the Letter imposed an ambiguous condition on a federal grant, that the Appeals Board abused its discretion in denying discovery, that the HHS Grants Administration Manual limits the disallowance period to three years, and that the district court should have taken judicial notice of the 2015 CMS Question and Answer document concerning training costs. The court noted CMS could have reimbursed Pennsylvania if Pennsylvania factored the amount into its rate-setting scheme instead of claiming it as administrative costs. View "Commonwealth of Pennsylvania Department of Human Services v. United States" on Justia Law

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Relator claimed (False Claims Act, 31 U.S.C. 3729-3733) that C&D manufactured and shipped 349 defective batteries to the U.S. government for use in intercontinental ballistic missile launch controls. The matter settled for $1.7 million, about six percent of the amount demanded in a Second Amended Complaint, entitling Relator to reasonable attorneys’ fees and costs. The parties were unable to agree on attorneys’ fees. The district court concluded that both parties’ counsel were uncooperative and did not act in good faith. Relator eventually increased his fee demand to $3,278,115.99, “almost $1 million more than the fees [he] sought a year ago and almost twice the dollar amount of the settlement [he] reached.” Relator used hourly rates that he “extrapolated” from actual Community Legal Services rates, which were higher than those that he originally used to calculate his demand. The court reduced Relator’s recoverable attorney hours for depositions, document review, summary judgment motions, a motion for reconsideration, Daubert motions, and travel time expenses, and applied a 10 percent reduction for lack of success on the merits. The parties agreed that for the purposes of the fee award, the court could use $1,794,427.27 for fees and $164,585.49 for costs. The Third Circuit remanded for consideration of “fees on fees” but otherwise affirmed. View "Palmer v. C & D Technologies, Inc" on Justia Law

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Accredo delivers clotting medication and provides nursing assistance for hemophilia patients. Accredo makes donations to charities concerned with hemophilia, including HSI and HANJ, which allegedly recommended Accredo as an approved provider for hemophilia patients. Greenfield, a former Accredo area vice president, sued, alleging violations of the Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b), and the False Claims Act, 31 U.S.C. 3729(a)(1)(A)-(B). If Greenfield prevailed, he would get at least 25% of any civil penalty or damages award. The government did not intervene. The district court, following discovery, granted Accredo summary judgment, finding that Greenfield failed to provide evidence of even a single federal claim for reimbursement that was linked to the alleged kickback scheme. The Third Circuit affirmed. The Anti-Kickback Statute prohibits kickbacks regardless of their effect on patients’ medical decisions. Because any kickback violation is not eligible for reimbursement, to certify otherwise violates the False Claims Act but there must be some connection between a kickback and the reimbursement claim. It is not enough to show temporal proximity. Greenfield was required to show that at least one of the 24 federally-insured patients for whom Accredo provided services and submitted reimbursement claims was exposed to a referral or recommendation by HSI/HANJ in violation of the Anti-Kickback Statute. View "Greenfield v. Medco Health Solutions Inc" on Justia Law

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DiFiore, working for CSL since 2008, became concerned about CSL marketing drugs for off-label uses not approved by the FDA and including off-label use in sales forecasts. DiFiore expressed her concerns to her supervisors and alleges that as a consequence of that protected conduct, she suffered adverse employment actions: a warning letter, after which CSL hired an employment coach to help DiFiore develop her leadership skills; a mid-year performance review with “needing improvement” evaluations in several areas; a second warning letter regarding her nonpayment of her company credit card; her deteriorating relationships with supervisors and management; and her removal from a committee and certain meetings. In May 2012, DiFiore was placed on a Performance Improvement Plan, requiring improvement within 45 days. Within a week, DiFiore resigned. DiFiore sued, claiming unlawful discharge under Pennsylvania law and retaliation in violation of the False Claims Act, 31 U.S.C. 3730(h). The district court granted summary judgment on the wrongful discharge claim and held that DiFiore could not rely upon constructive discharge as an adverse action in her FCA claim. The judge instructed the jury that the FCA retaliation provision required that protected activity be the “but-for” cause of adverse actions. The jury found in favor of CSL. The Third Circuit affirmed. An employee’s protected activity must be the “but for” cause of adverse actions to support a claim of retaliation under the FCA. View "DiFiore v. CSL Behring LLC" on Justia Law

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Caremark is a pharmacy benefit manager. In 2006, Caremark employees identified approximately 4,500 Prescription Drug Events (PPDEs) under Medicare Part D that had been authorized for payment by Caremark, but not yet submitted to the Centers for Medicare and Medicaid Services (CMS), due to the lack of a compatible Prescriber ID. Caremark then used a dummy Prescriber ID for those PDEs and programmed that dummy Prescriber ID into its system. Thereafter, when any claim with a missing or incorrectly formatted Prescriber ID was processed, the system would default to the dummy, which allowed Caremark to submit for payment PDEs without trigging CMS error codes. Spay, a pharmacy auditor, discovered the use of “dummy” Prescriber IDs while auditing a Caremark client. That client dropped all issues identified in the audit, collected no recovery from Caremark, and did not pay Spay. Spay filed a qui tam lawsuit, asserting violations of the False Claims Act because the inaccurate PDEs were used to support reimbursement requests. The government declined to intervene. The court granted Caremark summary judgment, finding that Caremark had established sufficient government knowledge to preclude finding the required element of scienter, noting that several courts have adopted the government knowledge inference doctrine. The Third Circuit affirmed, declining to adopt that doctrine but stating that the misrepresentations were not material to the government’s decision to pay the underlying claims. View "Spay v. CVS Caremark Corp" on Justia Law

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In 1993, Congress amended the Communications Act, 47 U.S.C. 151–622, to allow the Federal Communications Commission (FCC) to grant electromagnetic spectrum licenses through a system of competitive bidding. The Act requires the FCC to pursue objectives required by statute, including promoting economic opportunity and competition and ensuring that new and innovative technologies are readily accessible to the American people by avoiding excessive concentration of licenses and by disseminating licenses among a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women (designated entities or “DEs”). The FCC’s principal means of fulfilling the statutory objectives for DEs is to confer bidding credits upon small and rural businesses that participate in FCC auctions. Bidding credits operate as a discount on the spectrum DEs purchase, allowing them sometimes to outbid companies that make higher bids. In 2015, the FCC issued a rule indicating that it would cap credits available in future auctions. The Third Circuit concluded the FCC acted legally when it limited the bidding credits available to DEs. The Order: preserved a significant bidding credit program; reviewed data suggesting DE participation would continue despite the proposed caps; and altered other rules to make DEs more competitive. View "Council Tree Investors, Inc. v. Federal Communications Commission" on Justia Law