In the
United States Court of Appeals For the Seventh Circuit
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No. 24-1431 UNITED STATES OF AMERICA and THE STATE OF ILLINOIS, EX REL. A. SAMUEL ENLOE, Plaintiff-Appellant,
v.
HERITAGE OPERATIONS GROUP, LLC, and GREEN TREE PHARMACY, INC., Defendants-Appellees.
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Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:20-cv-01169 — Steven C. Seeger, Judge.
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ARGUED OCTOBER 29, 2024 — DECIDED AUGUST 17, 2026
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Before EASTERBROOK, JACKSON-AKIWUMI, and MALDONADO, Circuit Judges.
MALDONADO, Circuit Judge. A. Samuel Enloe alleges Heritage Operations Group and Green Tree Pharmacy Ĵ fraudulent claims to Medicare in violation of the False Claims Act. Heritage operates long-term care facilities in Illinois, for which Green Tree provides pharmacy services. According to 2 No. 24-1431
Enloe, Heritage and Green Tree dispensed controlled substances to residents of Heritage’s facilities without pharmacist approval, in violation of the Controlled Substances Act, and ȱĴȱȱȱȱbased on those fraudulent prescriptions.
The district court dismissed Enloe’s second amended complaint ȱ ȱ ȱ ǰȱ ęȱ ȱ ȱ ȱ ȱ ȱ fraud with particularity as required by Federal Rule of Civil ȱşǻǼǯȱȱȱȱȱĜǯ I.
Heritage operates about forty long-term care facilities in Illinois. Green Tree, a Medicare-approved Part D sponsor, provides pharmacy services to Heritage’s facilities. Both companies are owned and operated by the same family.
Enloe has dedicated his career to the long-term care pharmacy industry. He spent twenty years at Omnicare, a major pharmacy in the long-term care business, before founding his own pharmacy now serving the same market.
Enloe claims that Green Tree and Heritage dispensed controlled substances to Heritage’s residents without valid prescriptions . In treating residents at Heritage’s facilities, Green Tree pharmacists often ę prescriptions for pain relieving drugs like opioids. These drugs are heavily regulated under the Controlled Substances Act (CSA), 21 U.S.C. §§ 801 et seq, based on their potential for abuse and dependency. The CSA grades drugs by schedule, with Schedule I drugs that serve no medical purpose being the most regulated, and Schedule V drugs being the least regulated. 21 U.S.C. § 812. Enloe’s claims concern Schedule II drugs.
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Typically, to dispense Schedule II drugs, a pharmacist ȱȱ Ĵ and signed prescription from a physician. 21 C.F.R. § 1306.11(a). But there are exceptions to this rule. Id. § 1306.11(d). In emergency situations, a pharmacist may dispense a Schedule II drug “upon receiving” an oral prescription from a physician, so long as the prescription is “immediately reduced to writing by the pharmacist,” and the physician ȱȱ Ĵȱȱȱȱ¢ȱ ȱ seven days. 1 Id. Enloe claims that Heritage and Green Tree violated these regulations in dispensing emergency Schedule II drugs, which led to the submission of false claims to Medicare for reimbursement.
Enloe grounds his allegations in an internal Green Tree policy governing the use of emergency narcotics kits at Heritage ’s facilities. These kits had small quantities of Schedule II drugs that could be dispensed to residents only in cases of emergency. Green Tree’s policy instructed nurses on how to dispense medication from the kits in compliance with the CSA. ę¢ǰȱhe policy required nurses to obtain a valid prescription from a practitioner prior to dispensing any Schedule II drug from the kit. Because the pharmacy was only open from 9:00 a.m. to 5:30 p.m. Monday through Saturday and was closed on Sundays, the policy directed the authorized practitioner to leave a voicemail for the pharmacist with
1 21 C.F.R. § 290.10 defines “emergency situation” as a situation where
the “immediate administration of the controlled substance is necessary[] for proper treatment,” no “appropriate alternative treatment is available,” and it is “not reasonably possible for the prescribing practitioner to provide a written prescription to be presented to the person dispensing the substance, prior to the dispensing.”
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the oral prescription if the medication was needed after pharmacy hours.
According to Enloe, the policy’s directions, combined with Green Tree’s ȱ ȱ ěȱ ȱ ȱ ȱ , ę that Schedule II drugs were dispensed without a “valid prescription.” His reasoning begins with the assumption that residents at Heritage’s facilities need Schedule II drugs when a pharmacist is not on duty. Any time a Schedule II drug was dispensed from the emergency kit when the pharmacy was closed, Enloe contends the defendants cut out the pharmacist’s role and violated the CSA. ę¢ǰȱ hen a practitioner prescribed a Schedule II drug after hours by leaving a voicemail for the pharmacy, Enloe alleges that a Green Tree pharmacist would not receive that prescription until the following day, after the drugs were already dispensed. Going one step further, Enloe alleges that in some cases, the nurse did not even have a prescription before dispensing drugs from the emergency kit. In those cases, Enloe contends that the nurse would obtain a backdated prescription the next day from an authorized practitioner to make up for the discrepancy , which he claims is also prohibited by the CSA. Enloe predicts hundreds, if not thousands, of instances where Schedule II drugs were dispensed to Heritage’s residents in violation of the CSA.
Resting on these allegations, Enloe concludes that Green ȱȱ ȱȱĴȱȱȱȱȱmedications to Medicare. He contends that because Green Tree was dispensing Schedule II drugs improperly, and because Green Tree was a Medicare Part D sponsor, it follows that any claims to Medicare for reimbursement for medication dispensed in violation of the CSA were false.
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Enloe also alleges that Heritage and Green Tree knew that these claims for payment were false because two major pharmacies were previously investigated for what he labels the “same practices.” ę¢ǰȱ (incidentally, Enloe ’s former employer) and PharMerica, pharmacies also servicing long-term care facilities, entered into ¢ȱĴȱ with the government over allowing nurses to dispense Schedule II drugs without any valid prescription from a physician. ȱȱȱȱŘŖŗŜȱĴȱȱ¢ȱȱrug Enforcement Agency and sent to a pharmacists’ non-ęȱ£Ȭ tion, which, according to his reading, required pharmacies to ěȱȱȱŘŚȦŝȱȱęȱȱȱ¢ȱȬ tions. ȱȱĴǰȱȱȱstated that “controlled substances may not be dispensed from the kit for emergencies prior to receipt by the pharmacist of a valid prescription[.]” These two pieces of information, Enloe contends, were enough to put Heritage and Green Tree on notice that dispensing Schedule II drugs before a pharmacist’s approval of the prescription ȱȱĴȱȱȱȱȱwas unlawful.
Enloe sued Heritage and Green Tree, bringing claims under the False Claims Act, the Controlled Substances Act, and for unjust enrichment. The district court dismissed Enloe’s claims under the FCA, concluding that he failed to plead the who, what, when, where, and how of the alleged fraud, as required by Federal Rule of Civil Procedure 9(b). The district court further dismissed Enloe’s CSA claims, concluding that the Act does not provide a private cause of action. Because Enloe’s substantive claims under the FCA and CSA failed, the district court also dismissed his unjust enrichment claim.
Enloe now appeals the district court’s dismissal of his second amended complaint arguing that his FCA claims should 6 No. 24-1431
survive dismissal. He does not challenge the dismissal of his CSA and unjust enrichment claims.
II.
We review a district court’s grant of a Rule 12(b)(6) motion to dismiss de novo. United States ex rel. Hanna v. City of Chicago , 834 F.3d 775, 778 (7th Cir. 2016). In construing the complaint , we accept all well-pleaded facts as true and draw all reasonable inferences in the ě’s favor. United States ex rel. Prose v. Molina Healthcare of Ill., Inc., 17 F.4th 732, 738–39 (7th Cir. 2021).
The FCA allows a private person—a relator—to prosecute qui tam actions against alleged fraudsters on behalf of the government. United States ex rel. ĵ v. Automation Aids, Inc., 896 F.3d 834, 840 (7th Cir. 2018). Where, as here, the government does not intervene in the case, the relator may proceed on behalf of the government. Id. Successful qui tam suits are often brought by whistleblowers with inside information about fraud being perpetuated inside an organization. As a competitor in the long-term care pharmacy business, Enloe is ěly situated than the typical relator. But despite his outsider status, Enloe contends he has enough inside information to prosecute this alleged fraud and that he has pleaded Ĝȱȱȱȱȱ.
Liability arises under the FCA if an individual “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” to the government, or “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim[.]” 31 U.S.C. §§ 3729(a)(1)(A)–(B). Because the FCA is an anti-fraud statute, claims arising under it are subject to the heightened pleading
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requirements of Federal Rule of Civil Procedure 9(b). Berko-
ĵ, 896 F.3d at 839. ȱ şǻǼȱ ȱ ȱ ěȱ ȱ fraud to “state with particularity the circumstances constituting fraud.” FED. R. CIV. P. 9(b).
ȱȱȱȱȱȱǰȱȱěȱȱ with particularity that: “(1) the defendant made a statement in order to receive money from the government; (2) the statement was false; and (3) the defendant knew the statement was false.” ĵ, 896 F.3d at 840 (quoting United States ex rel. Gross v. AIDS Rsch. All.-Chi., 415 F.3d 601, 604 (7th Cir. 2005)). ȱěȱȱȱȃȱȱȱȱȱȬ stantiation” into the fraud allegations to survive dismissal. United States ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d 770, 776 (7th Cir. 2016).
At the same time, this Court has declined to impose a requirement to present or allege facts about a ęȱȱ or bill Ĵȱȱȱgovernment to state an FCA claim. Id. at 777; see also United States ex rel. Mamalakis v. Anesthetix Mgmt. LLC, 20 F.4th 295, 301 (7th Cir. 2021) (recognizing that a relator “need not produce the invoices (and accompanying representations) at the outset of the suit” ǻȱĴǼ). ȱȱěȱȱȱȱȱȃ¢ȱǽǾȱȱȱ the conclusion that the defendant had presented claims to the Government.” Presser, 836 F.3d at 778. A typical way to ac- ȱȱȱȱȱȃęȱȱ¡Ȅȱ of false claims. Mamalakis, 20 F.4th at 302. For example, in Mamalakisǰȱ ȱ ȱ ěȱ ǻa former employee) did not have personal knowledge of billing details, he successfully stated a claim by alleging “detailed” examples of the conduct that led to the alleged fraud, “¢ȱęȱȱȱ 8 No. 24-1431
procedures and describing why each procedure should not have been billed as medically directed.” Id. at 303.
Enloe’s complaint fails to meet these pleading requirements . His claims about the alleged fraud do not rise to the level of an FCA violation. ȱĴǰȱȱ¢ȱȱ that, based on the policy and Green Tree’s hours of operation, we should assume that Schedule II drugs were unlawfully dispensed to Heritage’s residents. And further, he contends that because Green Tree is a Medicare-approved Part D spon- ǰȱȱȱȱȱĴȱȱȱȱȱȱȬ lawfully dispensed these drugs. But Enloe’s allegations amount to speculation resting on layers of assumptions unsupported by any concrete factual allegations. See Presser, 836 F.3d at 780 (dismissing FCA claims that “lack[ed] a concrete ȄȱȱȃǽǾȱ¢ȱȱǽěȂǾȱȱȬ mation” that was “not supported in any concrete manner.”) ȱȱ¢ȱȱĜȱȱȱȱȱȱ conclusion that Heritage or Green Tree plausibly presented false claims to the Government for two reasons.
First, we are doubtful that Enloe has alleged a violation of the CSA when at most he points to a gray area in the regulations . Section 1306.11 does not require pharmacist approval of Schedule II drugs in emergency situations like Enloe con- ǰȱ ȱ ȱ ¢ȱ ȱ ȱ ȱ ȱ ȱ ěȱ ȱŘŚȦŝǯȱ ȱȱȱȱǯȱȱȬ tion provides that a pharmacist “may dispense” a controlled substance “upon receiving” oral authorization. 21 C.F.R. § 1306.11(d). But if an authorized prescriber calls and leaves an oral prescription in the pharmacy’s voice mailbox before the drugs are dispensed from the emergency kit, were the drugs dispensed upon the pharmacist’s receipt of the oral
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prescription if the pharmacist does not listen to the voicemail until the next day? Perhaps, but it is not clear.
Enloe ȱȱȱȱĴȱȱa 2016 DEA Ĵȱ to support his reading of the CSA regulations, but these two sources do not get Enloe far. To start, the Omnicare and ȱ Ĵȱ ȱ ¢ȱ ěȱ conduct—dispensing Schedule II drugs to residents of long- term care facilities without any prescription at all. The role of the pharmacist was not at issue. Here, Green Tree’s policy required a valid prescription from an authorized practitioner, even if it was an oral prescription in the case of an emergency. ȱȱȱ¢ȱȱȱĴȱȱ¢ȱ allege that Heritage or Green Tree violated the CSA regulations in dispensing emergency drugs.
ȂȱȱȱȱŘŖŗŜȱȱĴȱȱ¢ȱĚ ǯȱ ȱĴȱȱȱȱȂȱȱȱȱȬ vant regulations, explaining that controlled substances could only be dispensed from the emergency kits after “receipt by the pharmacist of a valid prescription[.]” Enloe argues that ȱ ȱ Ĵȱ ȱ ȱ ȱ ȱ ȱ ȱ ěȱ ȱ ŘŚȦŝǯȱ ȱ ȱ ȱ ȱ ȱ Ȭ ȱȱȱȂȱŘŖŗŜȱĴǯȱ ȱȱȱȱȱ ¢ȱȱěȱȱȱȱȱȱȱȱ¢ǯȱȱ making all inferences in favor of Enloe, at most, the DEA’s Ĵȱęȱȱ¢ȱȱ ȱȱȂȱǯȱȱ “receipt by a pharmacist” mean that a voicemail in the phar- Ȃȱ ¡ȱ ȱ ȱ ȱ ȱ ȱ ęȱ ȱ regulation? Or must we take it one step further, as Enloe suggests , and read an additional requirement that a pharmacist be available to approve the prescription before it is dispensed in an emergency situation? Best case scenario for Enloe, the 10 No. 24-1431
ĴȂȱȱȱǯȱȱȱȱ ȱȱȱ Heritage failed to comply with vague guidance cannot form ȱȱȱȂȱȱȱ¢ȱ ¢ȱĴȱ false claims to the government. See United States ex rel. Main v. Oakland City Univ., 426 F.3d 914, 917 (7th Cir. 2005) (“Tripping up on a regulatory complexity does not entail a knowingly false representation.”).
Enloe relies mainly on three district court opinions where ȱěȂȱȱȱǰȱȱȱȱǯȱNone gets Enloe very far. Tȱ ěȱ ȱ those ȱ ȱ ęȬ cantly more facts about the alleged schemes than Enloe does here. In United States ex rel. Stop Ill. Marketing Fraud, LLC v. Addus HomeCare Corp., the relator alleged a scheme in which the defendant ěȱȱȱȱȱȱȱȱ way to double its revenue from Medicare. No. 13 CV 9059, 2017 WL 467673, at *11 (N.D. Ill. Feb. 3, 2017). Because Medicare ’s rules required compliance with the Anti-Kickback Statute , and because the relator alleged a ęȱincrease in the defendant’s Medicare referrals resulting from the scheme—and accordingly, increased revenue—the allega- ȱĴȱa “strong inference” that the defendant sub- Ĵȱȱ. Id. Similarly, in United States ex rel. Myers v. Am.’s Disabled Homebound, Inc., the relator was an insider who had worked for the defendant and alleged that she had been ę¢ directed to upcode bills to Medicare for higher reimbursements. No. 14 CV 8525, 2018 WL 1427171, at *4–7 (N.D. Ill. March 22, 2018). In United States ex rel. Graziosi v. Accretive Health, Inc., the relator, who had worked for one of the defendants, alleged that the defendants violated unambiguous Medicare rules and procedures by upcoding hospital ȱȱȱȱěȱȱȱȱ¢ȱ
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from Medicare. No. 13-CV-1194, 2018 WL 4503366, *2–6 (N.D. Ill. Sept. 20, 2018).
Contrast the allegations in Stop Ill. Marketing Fraud, Myers, and Graziosi with Enloe’s second amended complaint. To start, as already discussed, Enloe relies on vague regulations and guidance to support his theory whereas these relators relied on unambiguous Medicare rules prohibiting upcoding and kickbacks. Further, Enloe’s only source of knowledge about Green Tree and Heritage’s drug dispensing practices comes from the narcotics policy. He makes no plausible allegations about ȱę to Medicare, ȱȱěȱ in Stop Ill. Marketing Fraud, nor does he have personal knowledge about upcoding ȱ ȱ ěȱ ȱ Myers. And while Enloe, like the relator in Graziosi, relies on an internal ¢ȱȱȱȱȱȱȱȱĴȱ false claims, Enloe’s allegations of hypothetical regulatory violations are a far cry from Graziosi’s allegations that the defendants violated Medicare’s clear-cut requirements for admissions determinations. Comparable allegations are absent from Enloe’s complaint. His allegations do not rise to the same level of particularity as the allegations in Stop Ill. Marketing Fraud, Myers, or Graziosi.
Enloe argues that the pleading requirement should be relaxed for him because the details of the fraud lie solely with Heritage and Green Tree. We have recognized that this is a challenge any relator faces in bringing an FCA claim; “[b]ut ȱĜ¢ȱȱȱȱǽa relator] of his obligation to adequately plead all of the elements of an FCA claim or to ¢ȱ ȱ ȱ ȱ ȱ ęȱ ȱ ǯȄ Berko-
ĵ, 896 F.3d at 843 ǻȱĴǼ. While we “remain sen- ȱȱȱ¢ȱȱ¢ȱȱȱěȱ 12 No. 24-1431
ȱěȱȱǽǰǾȄȱEnloe still must come forward with particularized ȱ ȱ ȱ ȱ Ĵǯ Presser, 836 F.3d at 778.
Second, even if we assume that Enloe’s reading of the CSA’s requirements for dispensing Schedule II drugs is correct and he pleaded with particularity that Heritage and Green Tree dispensed medication in violation of the CSA, his complaint still fails to allege materiality. Enloe must allege that the misrepresentation resulting from the regulatory violation would have been material to the government’s decision to pay. Prose, 17 F.4th at 742–43. This “strict” element demands more than allegations that the government requires compliance with certain conditions. Id. One way to meet the materiality requirement is to allege that the government consistently refuses to pay claims that violate certain requirements . Universal Health Servs., Inc. v. United States, 579 U.S. 176, 194–95 (2016).
Enloe again relies on ȱĴȱȱ ȱȱ government and Omnicare and PharMerica as proof that compliance with the CSA regulations is a material condition to receive payment from the government. But as explained, ȱȱȱȱȱȱĴȱ ȱȱȱȱȬ duct Enloe alleges here. And in any event, “[i]t is not enough simply to say that the government required compliance with a certain condition for payment.” Prose, 17 F.4th at 740. Instead , Enloe’s allegations must show that “the government ac- ¢ȱĴs weight to that requirement and relies on compliance with it.” Id. Citing no other allegations, Enloe fails to plead materiality.
Accordingly, we agree with the district court that Enloe has failed to state an FCA violation. In reaching this
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conclusion, we do not hold that an outsider can never bring a qui tam action alleging violations of the FCA. But what a relator cannot do is assume unlawful practices on the part of a competitor based on vague regulations and guidance with no particularized factual basis.
III
The district court properly dismissed Enloe’s FCA claims. Enloe makes no argument on appeal that the district court erred in dismissing his claim under the Controlled Substances Act and for unjust enrichment. Accordingly, we AFFIRM the judgment of the district court.
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JACKSON-AKIWUMI, Circuit Judge, concurring in the judgment . I agree with my colleagues that the district court properly dismissed Enloe’s FCA claims. I reach that conclusion ě¢, by focusing only on the fact that Enloe failed to plead materiality, as my colleagues agree. Ante, at 12–13.
The CSA regulation at issue strikes me as clear: “[A] pharmacist may dispense a [Schedule II] controlled substance … upon receiving oral authorization of a prescribing individual practitioner….” 21 C.F.R. § 1306.11(d) (emphasis added). ǻǰȱ ȱǰȱȱȃ¢ȱȄȱȱĚȱȱȬ macists exercise independent judgment in verifying prescribed medications.) Although Enloe’s complaint is not as detailed as others that have passed muster, it sets forth the “who, what, when, where, and how” of the alleged fraud. United States ex rel. Presser v. Acacia Mental Health Clinic, LLC, 836 F.3d 770, 776 (7th Cir. 2016) (ȱĴ); see also id. (cautioning that we ought not take an “overly rigid view” of the pleading requirements for fraud claims and reminding that the “precise details that must be included in a complaint” may vary across cases (quoting Pirelli Armstrong Tire Corp. Re- ȱǯȱęȱǯȱǯȱȱǯ, 631 F.3d 436, 442 (7th Cir. 2011)).
Enloe presents the fraud as follows: From 2014 through 2022, relying on a policy that Green Tree’s leadership (named in the complaint) adopted, nurses at Heritage’s long-term care ȱȱȱ ȱȱ ȱęȱȱ a pharmacist’s authorization. Taking these allegations as true, the lack of prior authorization was a CSA violation. This in turn, Enloe alleges, was an FCA violation because Heritage and Green Tree sought payment for drugs that were not payable under Medicare because they were not dispensed upon
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a valid prescription. See United States v. Molina Healthcare of Ill., Inc., 17 F.4th 732, 739 (7th Cir. 2021) (describing the conduct that violates the FCA); see also 42 U.S.C. § 1395w-102 (defining a covered Medicare Part D drug as “a drug that may be dispensed only upon a prescription and that is [a covered outpatient drug under 42 U.S.C. § 1396r-8]”); 42 C.F.R. § 423.505(h)(1) (“The Part D plan sponsor agrees to comply with—(1) Federal laws and regulations designed to prevent fraud, waste, and abuse, including but not limited to applicable provisions of Federal criminal law, the False Claims Act (31 U.S.C. 3729 et seq.), and the anti-kickback statute….”); 42 C.F.R. § 423.505(i)(2)(iv) (as to contracts between Part D sponsors and “first tier, downstream, and related entities,” “[e]ach and every contract must specify that first tier, downstream , and related entities must comply with all applicable Federal laws, regulations, and CMS instructions”); 42 C.F.R. § 423.505(k)(1), (3) (conditioning the payment to Plan D sponsors for qualified prescription drug coverage on the Plan D sponsors’ CEO, CFO, or “individual delegated the authority … certify[ing] … the accuracy, completeness, and truthfulness of all data related to payment”).
I also credit Enloe’s reliance on Graziosi, where the district court accepted a relator’s presentation of FCA claims using Enloe’s same method of presentation (granted, the relator was an insider in Graziosi). ę¢ǰȱ ȱ Graziosi court found Ĝ allegations based on documents detailing the purported fraud as to ę¢-nine hospitals and a third-party company , even though the relator only worked for one of the hospitals and did not identify any patient involved. United States ex rel. Graziosi v. Accretive Health, Inc., No. 13-CV-1194, 2018 WL 4503366, at *5–7 (N.D. Ill. Sept. 20, 2018).
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Still, because I agree that Enloe cannot meet the “rigorous materiality requirement,” I concur in the judgment. Universal Health Servs., Inc. v. United States, 579 U.S. 176, 181 (2016).