The Department of Justice (DOJ) is pursuing a compounding pharmacy and its private equity fund owner alleging that the pharmacy filed claims with Tricare that were rendered false by alleged kickbacks (for further details please see "Court provides insight into when funds may be held responsible for portfolio company conduct" and "Private equity funds face increasing risk of False Claims Act liability").
In November 2018 the magistrate judge filed an opinion recommending the False Claims Act claims be dismissed for the DOJ's failure to adequately plead its claims on either an implied or express certification theory of liability. However, the magistrate held that the allegations that the private equity fund and its principals knew of some of the alleged misconduct and caused the submission of false claims by the portfolio company were otherwise sufficient to state a claim against those defendants under the False Claims Act.
Both the defendants and the government filed objections to the magistrate's recommendation. In March 2019 the district court adopted the recommendation and dismissed the suit for a failure to adequately allege an implied or express certification theory of liability. In particular, the court held that it was insufficient to state a claim under the False Claims Act simply to allege the facts relevant to a violation of the Anti-kickback Statute. Rather, the government must establish that it "conditioned payment of a claim upon the claimant's certification in compliance with the antikickback provision".(1) Having failed to allege any facts relating to express certifications by the defendants "in connection with any of the representative claims provided", the court held that the express certification theory was not adequately pled. As to the implied certification theory of liability, the government alleged the Tricare claims were misleading in light of the defendant's failure to disclose the alleged kickbacks. However, the court found that the government failed to plead any specific representations in those claims (ie, dates of service, patient names, prescribers or the ingredients of the drugs). "While the Court… views the allegations in the Complaint in the light most favorable to the Government… the court cannot construe allegations that are absent. Nor is the Court tasked with connecting the dots or filling the blanks." Thus, the claims similarly failed on an implied certification theory.
Having so held, the court found it unnecessary to reach the other holdings of the magistrate, including with respect to the private equity defendants' knowledge and causation. The court has ordered an amended complaint to be filed and pled by 18 March 2019.
Endnotes
(1) US ex rel Medrano v Diabetic Care Rx, LLC, 15-62617-CIV-BLOOM, SDFl (5 March 2018) (citing US ex rel Franklin v Parke-Davis, 147 F Supp 2d 39, 54 (D Mass 2001).
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