United States ex rel. Silver v. Omnicare, Inc.

222 F. Supp. 3d 391, 2016 WL 6997010, 2016 U.S. Dist. LEXIS 163456
CourtDistrict Court, D. New Jersey
DecidedNovember 28, 2016
DocketCIVIL ACTION NO. 11-1326
StatusPublished
Cited by1 cases

This text of 222 F. Supp. 3d 391 (United States ex rel. Silver v. Omnicare, Inc.) is published on Counsel Stack Legal Research, covering District Court, D. New Jersey primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States ex rel. Silver v. Omnicare, Inc., 222 F. Supp. 3d 391, 2016 WL 6997010, 2016 U.S. Dist. LEXIS 163456 (D.N.J. 2016).

Opinion

OPINION

Hillman, United States District Judge:

This is a False Claims Act (“FCA”) suit. As set forth in the Court’s previous opinion mainly denying Defendant PharMeri-ca’s Motion to Dismiss, Relator Marc Silver alleges “that defendants engaged in a [‘swapping’] scheme that violated the Anti-Kickback Statute by offering nursing homes below market prices for drugs to patients insured by Medicare Part A in exchange for referrals of prescriptions for nursing home patients insured by Medicare Part D or by Medicaid.” United States ex rel. Silver v. Omnicare, Inc., 2014 U.S. Dist. LEXIS 136800 at *1 (D.N.J. Sept. 29, 2014).1 Silver alleges that PharMerica defrauded the federal government when it submitted Medicare and Medicaid claims for reimbursement which certified PharMerica’s compliance with the Anti-Kickback Statute.

At issue is whether the public disclosure bar, or the original source exception to that bar, apply to Silver’s suit. Before the Court is PharMerica’s jurisdictional motion to dismiss pursuant to Fed. R. Civ. P 12(b)(1), which applies to Silver’s claims based on conduct before March 23, 2010; and PharMerica’s summary judgment motion, which applies to Silver’s claims based on conduct after March 23, 2010.2 For the reasons stated herein, the Court holds that, as to all of PharMerica’s conduct, the public disclosure bar applies, and the original source exception does not apply.3 Accordingly, both motions will be granted. The Court will also decline to exercise supplemental jurisdiction over the remaining state law claims.

I. Background

The allegations concerning the alleged fraudulent scheme have been set forth in the Court’s previous opinion and are not directly implicated by the instant motions. The following facts are most relevant to the issues presently before the Court.

Relator Silver has never worked for, nor done business with, PharMerica. (SUF ¶ 5) However, Silver is generally knowledgeable about the nursing home business, and the pharmacy business, because he is a former owner of both a nursing home and a pharmacy. (SUF ¶ 4) Thus, Silver knew about the Balanced Budget Act of 1997’s effect on the nursing home industry, which set the stage for potential swapping transactions. Specifically, Silver testified that the law “totally changed the financial picture for nursing homes in the United States,” (SUF ¶ 24), because as to Medi[396]*396care Part A patients, the government switched from a reimbursement system based on actual costs, to a prospective payment per diem fixed cost system. (SUF ¶ 25-26) According to Silver, this new arrangement provided the “clear motive” for pharmacies and nursing homes to engage in swapping transactions. (Silver Dep. p. 61-62)

A. HHS-OIG documents indicate that illegal swapping transactions may be occurring in the nursing home business

As quoted in Silver’s Third Amended Complaint, the Health and Human Services—Office of the Inspector General (HHS-OIG), in 1999, stated in an advisory opinion, that suppliers who offer “‘discounts on business for which the purchaser pays the supplier, in exchange for the opportunity to service and bill for higher paying Federal health care program business reimbursed directly by the program to the supplier’ ” violate the Anti-Kickback Statute. (TAC ¶ 61) Although the Advisory Opinion analyzed swapping transactions between nursing homes (referred to as “skilled nursing facilities” or “SNFs”) and an ambulance company (i.e., not nursing homes and pharmacies) the opinion specifically stated that the ambulance company’s inquiry

‘comes amidst a considerable number of informal inquiries and anecdotal reports regarding discounts to SNFs that this Office has received since the enactment of the SNF PPS [ (prospective payment system)]. These inquiries and reports suggest that suppliers of a wide range of SNF services are giving SNFs discounts for PPS-business that are linked, directly or indirectly to referrals of Part B business’

(TAC ¶ 62)(emphasis added).

The Third Amended Complaint also quotes a March, 2000, HHS-OIG “Program Guidance for Nursing Facilities,” which relied upon the 1999 Advisory Opinion, and explained,

‘[sjwapping occurs when a supplier gives a nursing facility discounts on Medicare Part A items and services in return for the referrals of Medicare Part B business. With swapping, there is a risk that suppliers may offer a SNF an excessively low price for items or services reimbursed under PPS in return for the ability to service and bill nursing facility residents with Part B coverage.’

(TAC ¶ 64)

The HHS-OIG, in 2008, stated again that “ ‘swapping arrangements violate the anti-kickback statute’

‘nursing facilities should not engage in swapping arrangements by accepting a low price from a supplier or provider on an item or service covered by the nursing facility’s Part A per diem payment in exchange for the nursing facility referring to the supplier or provider other Federal health care program business, such as Part B business excluded from consolidated billing, that the supplier or provider can bill directly to a Federal health care program.’

(TAC ¶ 65)(quoting HHS-OIG Supplemental Compliance Program Guidance for Nursing Facilities).

B. A Centers for Medicare and Medicaid Services (“CMS”) report indicates that long-term care pharmacies provide prescription drugs to nursing homes at little to no charge

In December 2004, The Lewin Group prepared a report entitled, “CMS Review of Current Standards of Practice for Long-Term Care Pharmacy Services; Long-Term Care Pharmacy Primer.” (Def s Ex. F) The report indicated that, as to long-term care pharmacies (“LTCPs”) in particular, conditions were ripe for swapping transactions:

[397]*397[i]n today’s environment, LTCPs provide many services to nursing facilities at little to no charge. When LTCPs do charge for services, the pricing for services is difficult to determine since services are often bundled together. As a result there is a great deal of uncertainty in the market regarding the cost to LTCPs of providing services of the potential charge structure that would exist in the market if LTCPs were reimbursed directly for the services they provide.
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Medicaid reimbursement rates are important to LTCPs not only because Medicaid accounts for the largest portion of LTCP revenue, but also because Medicaid rates are often used to set a pricing ‘floor’ in the industry, effectively setting the lowest price in the market and thereby guaranteeing minimum reimbursement rates to LTCPs. This practice arises for two reasons. First, LTCPs are concerned that offering nursing facilities rates lower than Medicaid’s for non-Medicaid residents could be viewed as an ‘inducement’ to attract Medicaid business and would be in violation of Fraud and Abuse statutes. Second, some Medicaid programs include a ‘most favored nation’ status clause in their contracts that require LTCPs to grant Medicaid the best price in the market; effectively, if a LTCP contracts with a nursing facility for a reimbursement rate below that of Medicaid, it must extend that same price to the Medicaid program.

(Ex. F, p. 1,19-20)

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222 F. Supp. 3d 391, 2016 WL 6997010, 2016 U.S. Dist. LEXIS 163456, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-ex-rel-silver-v-omnicare-inc-njd-2016.