{"id":4544,"date":"2015-01-15T01:09:00","date_gmt":"2015-01-15T01:09:00","guid":{"rendered":"https:\/\/www.healthlawpolicymatters.com\/?p=4544"},"modified":"2021-11-03T01:10:47","modified_gmt":"2021-11-03T01:10:47","slug":"pharmacy-qui-tam-based-on-uc-price-billing-survives-motion-to-dismiss","status":"publish","type":"post","link":"https:\/\/www.healthlawpolicymatters.com\/2015\/01\/15\/pharmacy-qui-tam-based-on-uc-price-billing-survives-motion-to-dismiss\/","title":{"rendered":"Pharmacy Qui Tam Based On U&C Price Billing Survives Motion to Dismiss"},"content":{"rendered":"\n

Once again, a pharmacy employee has filed a qui tam <\/em>involving a drug discount program, alleging that the failure of the pharmacy to use the discounted pricing as the \u201cusual and customary\u201d price in Medicaid and Medicare Part D billings resulted in falsely inflated claims to those programs. And once again, the qui tam <\/em>case has survived a Motion to Dismiss.<\/p>\n\n\n\n

In September of 2013, I\u00a0blogged<\/a>\u00a0about\u00a0qui tams\u00a0<\/em>based on usual and customary billings.\u00a0 That blog post was prompted by a ruling in\u00a0U.S. ex rel. Garbe v. K-Mart,\u00a0<\/em>that a\u00a0qui tam\u00a0<\/em>Complaint alleging the chain pharmacy\u2019s failure to use discounted pricing as the \u201cusual and customary\u201d price for medications in government program claims, was sufficient to pass muster under Rules 9(b) and 12(b)(6).<\/p>\n\n\n\n

Pharmacy claim forms contain a required field for the pharmacy to submit its \u201cusual and customary\u201d price for the billed medication.  That price is often factored into the reimbursement formula for government-funded health care programs.  However, government programs each define how \u201cusual and customary\u201d price is determined, and when it comes to Medicaid, each state is free to define the term differently.  In some instances the term may be defined as inclusive of any discount offered (akin to a most-favored-nation clause), in other instances the term may be defined as an average charged to or paid by any payor, or in still other instances the term may be defined as the amount charged to or paid by any cash-paying customer.<\/p>\n\n\n\n

In March 2014, the State of Texas entered into a $12 million state-specific false claims\u00a0settlement<\/a>\u00a0with a pharmacy chain based on allegedly inflated usual and customary billings to the Texas Medicaid Program. \u00a0The government referenced specific Texas regulations governing inclusion of discounts in calculating and submitting usual and customary prices for medication.<\/p>\n\n\n\n

So on January 9, 2015, I was not surprised to see another\u00a0qui tam\u00a0<\/em>based on usual and customary billing allegations survive a Motion to Dismiss in the Southern District of Indiana.\u00a0 In\u00a0U.S. ex rel. Doe et al. v. Houchens Industries, Inc.<\/em><\/a>,\u00a0<\/em>a pharmacy program was set up to charge cash-paying customers a small ($5.00) fee to participate in a rewards program offering flat discounted fees for hundreds of generic medications \u2014 but the pharmacy did not use those flat discounted prices as its usual and customary price in billings to Medicare Part D or the Illinois Medicaid program. The Court was persuaded that both the Illinois Medicaid Program and Medicare Part D define \u201cusual and customary\u201d in terms of the amount charged cash-paying, general public customers.<\/p>\n\n\n\n

In the Houchens <\/em>case, the pharmacy tried to distinguish its program based on the fact that participants had to enroll in the rewards programs, asserting that the enrollment process attenuated the participants from the \u201cgeneral public.\u201d  However, the employee-whistleblower alleged that the fee was essentially a pretext based on the following: (i) enrollment was open to anyone; (ii) enrollees who actually paid the $5.00 enrollment fee received a gift card in that amount to offset the payment; (iii) the computer system did not even track receipt of the enrollment fee; and (iv) eventually staff was instructed not to assess the enrollment fee.  The Court, citing to Garbe<\/em>, found that the enrollment was not a barrier to finding that the pharmacy\u2019s failure to bill the flat, discounted price as its \u201cusual and customary\u201d price was actionable under the state and federal false claims act.<\/p>\n\n\n\n

I continue to believe that \u201cusual and customary\u201d billing for drug products will be fodder for qui tam <\/em>filings.  But as I said in September 2013, \u201cusual and customary\u201d price allegations present challenges in the false claims arena.  Practitioners need to keep in mind that:<\/p>\n\n\n\n