UNITED STATES OF AMERICA et al v. MEDCO HEALTH SYSTEMS, INC. et al
OPINION. Signed by Judge Noel L. Hillman on 12/22/2016. (tf, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
UNITED STATES OF AMERICA,
STATE OF NEW JERSEY, ex rel.
STEVE GREENFIELD, et al.,
CIVIL NO. 12-522(NLH)(AMD)
MEDCO HEALTH SYSTEMS, INC.,
ACCREDO HEALTH GROUP, INC.,
and HEMOPHILIA HEALTH
MARC M. ORLOW
REGINA D. POSERINA
BEGELMAN & ORLOW, PC
411 ROUTE 70 EAST
CHERRY HILL, NJ 08034
On behalf of Steve Greenfield
JAMES W. CHRISTIE
CHRISTIE, PABARUE & YOUNG, PC
1930 EAST MARLTON PIKE
BUILDING Q, SUITE 3
CHERRY HILL, NJ 08003
ROBERT M. GOODMAN
CLIFFORD BRIAN KORNBREK
GREENBAUM, ROWE, SMITH & DAVIS, LLP
75 LIVINGSTON AVENUE
ROSELAND, NJ 07068-3701
STEVEN M. PYSER
WILLIAMS & CONNOLLY LLP
725 12TH STREET NW
WASHINGTON, DC 20005
On behalf of defendants
CHARLES SCOTT GRAYBOW
OFFICE OF THE U.S. ATTORNEY
DISTRICT OF NEW JERSEY
970 BROAD STREET - SUITE 700
NEWARK, NJ 07102
On behalf of the United States
HILLMAN, District Judge
This qui tam action concerns claims by plaintiff, Steve
Greenfield, that defendants violated the federal False Claims
Act (“FCA”) relating to pharmaceutical products for hemophilia. 1
Currently before the Court are the parties’ competing motions
for summary judgment in their favor. 2
For the reasons expressed
A private individual, otherwise known as a relator, may bring a
civil action in the name of the United States to enforce § 3729
of the FCA and may share a percentage of any recovery resulting
from the suit. U.S. ex rel. Wilkins v. United Health Group,
Inc., 659 F.3d 295, 305 (3d Cir. 2011) (citing 31 U.S.C. §
3730(b) & (d)). Because it was filed as a qui tam action, the
entire case was filed under seal in order to allow the United
States and interested states to investigate whether they wished
to intervene in the action and prosecute plaintiff’s claims on
their behalf. See 31 U.S.C. § 3730(b)(2). Neither the United
States government nor any of the states listed in the complaint
chose to intervene in the action. Accordingly, the complaint
was unsealed, and from that point on the case has been
Also pending are pre-trial motions in limine and motions to
seal relative to the parties’ summary judgment motions and
motions in limine. Because the Court finds that the subject
documents of the parties’ motions to seal meet the requirements
below, defendants’ motion will be granted, and plaintiff’s
motion will be denied.
The allegations advanced by plaintiff against defendants,
Medco Health Solutions, Inc., 3 Accredo Health Group, Inc.
(“Accredo”), and Hemophilia Health Services, Inc. (“HHS”), have
been detailed comprehensively in the Court’s prior two Opinions
resolving defendants’ motions to dismiss.
(Docket No. 42 and
The Court incorporates into this Opinion the recitations
of the background of this case from the previous Opinions.
Briefly summarized, plaintiff contends that in his capacity
as an area vice-president of Accredo, he learned of defendants’
fraudulent practices related to their efforts to maintain and
increase sales of their products to treat hemophilia. 4
of Local Civil Rule 5.3(c), the motions to seal will be granted.
(Docket No. 107, 113, 117, 128, 133.) As a result of this
Opinion, the motions in limine are now moot, and will be denied
accordingly. (Docket No. 118, 120, 122, 143.)
Medco Health Solutions, Inc. was improperly pled as “Medco
Health Systems, Inc.”
Hemophilia is a rare bleeding disorder, and those with the
disorder have little or no “clotting factor.” Treatment for
hemophilia is typically either “on-demand,” where a patient
receives factor replacement therapy to stop a bleed, or
“prophylactic,” where a patient receives factor replacement
therapy to prevent a bleed. Clotting factor products are
expensive, with the annual cost for the treatment of one patient
hemophilia treatment is very expensive, New Jersey law requires
health benefit providers to contract with state-authorized
hemophilia treatment centers to provide hemophilia patients with
their necessary treatment regimen.
The Hemophilia Association of New Jersey, Inc. (“HANJ”) was
created to coordinate and provide treatment to hemophilia
HANJ is a tax exempt entity that, through grants,
funds referral entities and makes recommendations to the state
for competitive providers.
HANJ formed Hemophilia Services,
Inc. (“HSI”), also a tax exempt organization, which works with
hemophilia treatment centers (HTCs), insurers, and participating
home care vendors to provide case management services for the
hemophilia population in New Jersey.
HSI receives charitable
donations, which it grants to HANJ, and HANJ provides insurance
and other financial assistance to individuals with hemophilia
(hereinafter, HANJ and HSI will be referred collectively as
Plaintiff claims that Medco, through Accredo and HHS, made
charitable contributions in amounts of $175,000 to $500,000 or
more to HSI/HANJ from 2007 through 2011, with the intent to buy,
influence, and induce referrals to defendants.
ranging from $50,000 to $100,000 or more.
contends that this scheme violates the FCA because many of
defendants’ hemophilia customers referred by HANJ/HSI through
kickbacks in violation of the Anti-Kickback Act, 42 U.S.C. §
1320a-7b(b) (“AKS”) are recipients of federally funded health
benefit programs, such as Medicare and Medicaid, and when
defendants made claims to the government for payment, they
falsely certified their compliance with the AKS. 5
Both plaintiff and defendants have moved for summary
judgment in their favor on plaintiff’s claims.
Subject matter jurisdiction
This Court has jurisdiction over plaintiff’s federal claims
under 28 U.S.C. § 1331.
Standard for Summary Judgment
Summary judgment is appropriate where the Court is
satisfied that the materials in the record, including
depositions, documents, electronically stored information,
affidavits or declarations, stipulations, admissions, or
interrogatory answers, demonstrate that there is no genuine
Plaintiff’s complaint alleged a second part of the alleged
scheme, which concerned excessive gifts: once the charitable
donations have funneled patients to defendants’ products,
defendants ensure the hemophilia patients’ continued use of
these products by providing them with excessive gifts.
Plaintiff has not pursued that part of his claim.
issue as to any material fact and that the moving party is
entitled to a judgment as a matter of law.
Celotex Corp. v.
Catrett, 477 U.S. 317, 330 (1986); Fed. R. Civ. P. 56(a).
review of cross-motions for summary judgment reveals no genuine
issue of material fact, then judgment may be entered in favor of
the party deserving of judgment in light of the law and
See Iberia Foods Corp. v. Romeo Jr., 150 F.3d
298, 302 (3d Cir. 1998) (citation omitted).
The United States Supreme Court recently considered the
parameters of an FCA claim under the same theory presented by
The False Claims Act, 31 U.S.C. § 3729 et seq., imposes
significant penalties on those who defraud the Government. 6
. . . According to the [“implied false certification”]
theory, when a defendant submits a claim, it impliedly
certifies compliance with all conditions of payment. But
if that claim fails to disclose the defendant's violation
of a material statutory, regulatory, or contractual
requirement, so the theory goes, the defendant has made a
misrepresentation that renders the claim “false or
fraudulent” under § 3729(a)(1)(A). . . .
We first hold that, at least in certain circumstances, the
implied false certification theory can be a basis for
liability. Specifically, liability can attach when the
defendant submits a claim for payment that makes specific
The False Claims Act imposes civil liability on “any person who
... knowingly presents, or causes to be presented, a false or
fraudulent claim for payment or approval.” 31 U.S.C. §
representations about the goods or services provided, but
knowingly fails to disclose the defendant's noncompliance
with a statutory, regulatory, or contractual requirement.
In these circumstances, liability may attach if the
omission renders those representations misleading.
We further hold that False Claims Act liability for failing
to disclose violations of legal requirements does not turn
upon whether those requirements were expressly designated
as conditions of payment. . . . What matters is not the
label the Government attaches to a requirement, but whether
the defendant knowingly violated a requirement that the
defendant knows is material to the Government's payment
decision. A misrepresentation about compliance with a
statutory, regulatory, or contractual requirement must be
material to the Government's payment decision in order to
be actionable under the False Claims Act.
Universal Health Services, Inc. v. U.S. ex rel. Escobar, 136 S.
Ct. 1989, 1995–96 (2016).
In this case, plaintiff contends that defendants submitted
false claims for payment from the United States government
because the defendants falsely certified their compliance with
the Anti-Kickback Act, 42 U.S.C. § 1320a-7b(b) (“AKS”). 7
Plaintiff contends that defendants’ actions violate the FCA
because: (1) many hemophilia patients, having been referred
through and induced by illegal kickbacks to use defendants’
Plaintiff is not asserting an independent claim under the AKS.
The AKS is a criminal statute that does not provide for a
private cause of action. If an entity falsely certifies its
compliance with the AKS, that false certification can serve as
a basis for a civil FCA violation. See 31 U.S.C. §§ 3729–3733.
products, are recipients of federal Medicare and Medicaid
assistance, (2) federal funds therefore pay defendants for these
illegally procured prescriptions, (3) in order to be paid from
government funds, defendants have to certify that they have
complied with the anti-kickback laws (on Provider Agreement CMS
Form 855s), 8 and (4) defendants have presented claims to the
government for reimbursement knowing that they violated the
In other words, plaintiff contends that the government
would not have paid defendants’ claims for reimbursement of
hemophilia treatment products if it had known that defendants
obtained those patients by giving HANJ/HSI “donations” in
exchange for the referral of those patients to defendants’
products, in violation of the AKS.
It is undisputed that HANJ/HSI depends upon contributions
from the providers of hemophilia products, such as defendants,
Provider Agreement CMS Form 855s provides, “I agree to abide by
the Medicare laws, regulations and program instructions that
apply to this supplier. The Medicare laws, regulations, and
program instructions are available through the Medicare
contractor. I understand that payment of a claim by Medicare is
conditioned upon the claim and the underlying transaction
complying with such laws, regulations, and program instructions
(including, but not limited to, the Federal anti-kickback
statute and the Stark law), and on the supplier’s compliance
with all applicable conditions of participation in Medicare.”
to fund insurance programs and HTCs for its members, and it is
undisputed that HANJ/HSI is a veritable bulldog in its efforts
to secure those donations.
HANJ/HSI members are free to choose
from any provider for their hemophilia treatment products, but
HANJ/HSI maintains a group of preferred providers based on the
amount of the providers’ donations to HANJ/HSI.
On its website,
HANJ/HSI lists the preferred providers with links to those
providers’ websites for the convenience of HANJ/HSI members.
In 2009 and 2010, defendants reduced their donation to
HANJ/HSI significantly from $500,000 to $175,000, 9 and HANJ/HSI
was aggressive in its tactics to increase defendants’ donation
HANJ/HSI informed its members of the ramifications of
defendants’ reduced donations – namely, HANJ/HSI’s inability to
fund the insurance programs for its members – and HANJ/HSI asked
its members to contact defendants to voice their concerns.
Seventy-five members did so.
customers as a result.
Defendants also began to lose
In 2011, defendants state that in an
effort to stay in the good graces of HANJ/HSI and to maintain
Defendants relate that the reduced funding was a result of
budget constraints. Plaintiff contends it was because of
compliance concerns. The impetus for the reduced funding is not
relevant to the Court’s ultimate resolution of plaintiff’s
its customers, defendants determined to restore their donation
to HANJ/HSI to $350,000 in 2012.
Plaintiff claims that defendants’ charitable donations
were actually prohibited remuneration under the AKS because they
were intended to induce referrals of hemophilia patients. 10
Plaintiff claims that this amounts to a violation of the FCA
because defendants’ AKS violation resulted in payments to
defendants from the federal government for those members who
were insured under the federal health care programs.
To prove his FCA claim, plaintiff must pass two hurdles.
First, plaintiff must establish that defendants violated the AKS
through its alleged quid pro quo arrangement with HANJ/HSI.
Second, plaintiff must show that as a result of defendants’ AKS
violation, defendants received payment from the federal
As discussed below, plaintiff alleges that in addition to
helping fund insurance for HANJ members, defendants’ donations
also went directly to HTCs in the form of grants.
To establish a prima facie FCA violation under § 3729(a)(1), a
plaintiff must prove that “(1) the defendant presented or caused
to be presented to an agent of the United States a claim for
payment; (2) the claim was false or fraudulent; and (3) the
defendant knew the claim was false or fraudulent.” U.S. ex rel.
Wilkins v. United Health Group, Inc., 659 F.3d 295, 304-05 (3d
Cir. 2011) (citations omitted). On May 20, 2009, Congress
enacted the Fraud Enforcement and Recovery Act of 2009 (FERA),
Pub.L. No. 111–21, 123 Stat. 1617 (2009), which amended the FCA
A great deal of the parties’ briefing focuses on the nature
of defendants’ donations to HANJ/HSI.
Plaintiff contends that
defendants essentially paid HANJ/HSI to refer its members to
defendants for their hemophilia treatment needs, which is a
clear violation of the AKS.
Unsurprisingly, defendants maintain
that their donations to HANJ/HSI were indeed charitable, and
HANJ/HSI’s categorization of defendants as a preferred provider
with website links to their products does not constitute an
illegal quid pro quo arrangement.
The Court, however, does not need to delve into the
relationship between HANJ/HSI and defendants and determine
whether it violates the AKS.
Even accepting that plaintiff has
met his first hurdle in proving his FCA claim, 12 plaintiff has
and re designated 31 U.S.C. § 3729(a)(1) as 31 U.S.C. §
3729(a)(1)(A) and 31 U.S.C. § 3729(a)(2) as 31 U.S.C. §
HANJ/HSI’s efforts to fund its insurance programs and support
HTCs appear to be more like a worthy-cause extortion scenario
rather than a mutual back-scratching scheme. As an initial
matter, in order to qualify as a provider approved by HANJ/HSI,
HANJ required a provider to donate an “entry-level pledge” of at
least $5,000 a month to HANJ/HSI. As a provider increased its
profits, HANJ/HSI required more of a donation. When defendants
reduced their funding from $40,000 a month to $15,000 a month,
that loss of funding significantly affected HANJ/HSI’s programs.
In addition to asking defendants to reconsider, HANJ/HSI engaged
in an aggressive countermeasure by asking its members to
directly contact defendants to share their concerns, and not-sosubtly suggest that the members should switch providers so that
not surmounted the second.
The Court twice previously observed that the key fact
plaintiff must establish to prevail on his FCA claim is the link
between defendants’ alleged quid pro quo arrangement and payment
from the federal government.
The Court dismissed plaintiff’s
first complaint because plaintiff failed to satisfy Rule 9(b),
finding, “Accepting as true that defendants’ charitable
contributions to HANJ/HSI were intended to induce referrals to
defendants’ hemophilia treatment products, and that defendants’
actions demonstrated prohibited control over the charity’s use
of its donations, the facts pleaded in plaintiff’s complaint are
not sufficient, under his Rule 9(b) burden, to show that any of
those contributions are tied to federal funds.
To the contrary,
the quid pro quo scheme between HANJ/HSI and defendants alleged
by plaintiff appear to demonstrate that defendants’
contributions were used by HANJ/HSI to avoid the need to avail
themselves of any federal benefits program.”
(Docket No. 42,
Op. at 17.)
defendants would experience the economic consequences of their
donation reduction. Even though defendants’ higher donations to
HANJ/HSI resulted in more customers to defendants, if defendants
did not make charitable donations to HANJ/HSI, effectively they
would have little business in New Jersey from privately insured
The Court permitted plaintiff to file an amended complaint
– his third amended complaint - which the Court found was
sufficiently beefed up to satisfy Rule 9(b) and the Foglia v.
Renal Ventures Management, LLC, 754 F.3d 153, 155-56 (3d Cir.
2014) pleading standard.
(Docket No. 50.)
The Court noted that
in his newest complaint, plaintiff slightly shifted focus to the
goodwill generated by defendants’ donations, and the part of
this claim that was actionable was that the charitable donations
- or kickbacks - illegally induced HANJ to refer patients to
defendants’ products, defendants tracked these patients to
secure their continued use of defendants’ products through
excessive gifts, and there was evidence that some of these
patients were Medicaid and Medicare recipients.
(Docket No. 50
at 21 n.9.)
Discovery, however, has not yielded the evidence to support
As a primary matter, and noted above, see supra
note 5, since filing his fourth amended complaint, plaintiff has
not pursued as a part of defendants’ alleged kickback scheme his
AKS theory relating to excessive gifts.
Thus, plaintiff’s FCA
claim rests on the theory that defendants’ donations to HANJ/HSI
to fund insurance for its members, as well as support the
operation of HTCs, were in exchange for HANJ/HSI’s and the HTCs’
referral of patients to defendants’ products, which are
violations of the AKS.
The evidence in the record shows that from 2008 to 2012,
defendants billed the federal government for twenty-four
hemophilia patients, resulting in 897 invoices submitted to the
government for payment in the amount of $39,137,649.00. 13
data does not, however, show that any of these twenty-four
patients were referred from HANJ/HSI or an HTC as a result of
Plaintiff argues that because defendants violated the AKS
in their quid pro quo arrangement with HANJ/HSI, any and all
claims submitted to the government for hemophilia patients,
regardless of how the patients came to be customers of
defendants, violate the FCA because defendants certified their
compliance with the AKS for each of those claims.
argument is too broad a stroke.
Instead, plaintiff must show
This data comes from plaintiff’s expert report. (Docket No.
109-4 at 5-8.) Defendants’ expert presents essentially the same
numbers, except his report accounts for three patients who are
covered by Federal BlueCross/Blue Shield, which plaintiff’s
expert does not classify as a federally funded health plan, like
Medicare or Medicaid. Defendants’ expert also tallies 894
claims submitted, resulting in charges of $39,186,246.54 and
payments totaling $24,900,184.03. (Docket No. 109-4 at 61.)
The Court restates plaintiff’s expert’s data in the body of the
Opinion, but the difference between the two expert reports is
inconsequential to the resolution of the parties’ motions.
each claim submitted to the government for payment would not
have been paid by the government had it known about defendants’
false representation that they complied with the AKS.
remedies provision of the FCA supports this view.
The FCA provides, “any person who . . . knowingly presents,
or causes to be presented, a false or fraudulent claim for
payment or approval; [or] knowingly makes, uses, or causes to be
made or used, a false record or statement material to a false or
fraudulent claim . . . is liable to the United States Government
for a civil penalty of not less than $5,000 and not more than
$10,000 as adjusted by the Federal Civil Penalties Inflation
Adjustment Act of 1990 (28 U.S.C. 2461 note; Public Law 104–
410), plus 3 times the amount of damages which the Government
sustains because of the act of that person.”
31 U.S.C. §
The term “claim” is defined in relevant part as
“any request or demand, whether under a contract or otherwise,
for money or property . . . that is presented to . . . the
Id. § 3729(b)(2).
Thus, the FCA contemplates that a person violates the FCA
each time he knowingly presents a false claim for payment to the
government, and that person is liable for at least $5,500
(adjusted from $5,000 for inflation) for each false claim. 14
FCA does not suggest that one false claim for payment submitted
to the government causes all other claims for payment,
regardless of whether those other payments were shown to be
false, to be violations of the FCA.
See, e.g., United States ex
rel Doe v. Heart Solution PC, 2016 WL 3647987, at *6 (D.N.J.
2016) (denying defendants’ motion to reduce the damages
requested by the United States and its qui tam plaintiff:
plaintiffs requested $5,006,864.85 in actual damages (three
times the $1,668,954.95 that the defendants admitted Medicare
paid them for their fraudulent acts), and civil penalties of
$2,750,000, because the defendants made at least 500 fraudulent
claims to Medicare, and should be penalized at least $5,500 per
fraudulent claim, pursuant to 31 U.S.C. § 3729(a)(1)); U.S. v.
Bruce, 2013 WL 5780812, at *5 (D.N.J. 2013) (citing S. Rep. No.
In this case, the United States declined to proceed with this
action. Where “the Government does not proceed with an action
under this section, the person bringing the action or settling
the claim shall receive an amount which the court decides is
reasonable for collecting the civil penalty and damages. The
amount shall be not less than 25 percent and not more than 30
percent of the proceeds of the action or settlement and shall be
paid out of such proceeds. Such person shall also receive an
amount for reasonable expenses which the court finds to have
been necessarily incurred, plus reasonable attorneys' fees and
costs. All such expenses, fees, and costs shall be awarded
against the defendant.” 31 U.S.C. § 3730(d)(2).
345, 99th Cong., 2d Sess. 8 (1986), reprinted in 1986
U.S.C.C.A.N. 5266, 5273) (“Defendant is liable for $27,021.00
(three times the $9,007.00 he was improperly paid), in addition
to a civil penalty between $5,500 and $11,000 (the statutory
amount as adjusted by the Federal Civil Penalties Inflation
Adjustment Act of 1990, see 28 C.F.R. § 85.3(a)(9)) for each
The legislative history of the 1986 amendments to
the FCA makes clear that civil penalties are “automatic and
mandatory for each claim which is false.”
Because of the
relatively low total sum of fraudulently paid benefits and the
other facts of this case, the Court finds the statutory minimum
civil penalty of $5,500 for each false claim appropriate.
Defendant is therefore liable to the Government for the sum of
$27,021.00 and $82,500 ($5,500 times the fifteen false claims),
or a total of $109,521.00.”); Coleman v. Hernandez, 490 F. Supp.
2d 278, 281 (D. Conn. 2007) (“Liability attaches for each false
Thus, a defendant is subject to a civil penalty and treble
damages on each false claim.
United States ex rel. Kreindler &
Kreindler v. United Technologies Corp., 985 F.2d 1148, 1157 (2d
Cir. 1993) (holding that “the number of assertable False Claims
Act claims is not measured by the number of contracts, but
rather by the number of fraudulent acts committed by the
defendant”) (citing United States v. Ehrlich, 643 F.2d 634, 638
(9th Cir. 1981)) (“[I]f a person knowingly causes a specific
number of false claims to be filed, he is liable for an equal
number of forfeitures.”)); cf. U.S. v. Karron, 750 F. Supp. 2d
480, 494–95 (S.D.N.Y. 2011) (“The Government argues that Karron
is subject to penalties for each false report or certification
that she made to the Government.
The Government further asserts
that Karron submitted at least twenty false statements . . . .
We are not persuaded that summary judgment is proper at this
stage on the issue of civil penalties because the Government has
failed to specify the precise aspect of each of the twenty
documents that is false.
To clarify, the Government has
established that Karron made false statements as a general
matter and has unquestionably established at least one false
And it is certainly plausible that each of [the]
twenty documents contains a false statement or certification.
However, the Government has yet to establish that its position
with respect to each document is not subject to genuine
Here, plaintiff has shown that defendants submitted claims
to the government for hemophilia products, defendants certified
their compliance with the AKS for those claims, 15 and based on
defendants’ certification of compliance, the government paid
While accepting for the purposes of resolving the
parties’ motions the premise that defendants’ relationship with
HANJ/HSI violated the AKS, these proofs would be sufficient to
establish plaintiff’s FCA claim, but only if he had also shown
that each of defendants’ claims to the government for payment
was directly linked to defendants’ donations to HANJ/HSI.
Because plaintiff has not shown the link between defendants’ 24
federally insured customers and defendants’ donations to
HANJ/HSI, plaintiff’s FCA claim fails.
On the contrary, the record evidence establishes that each
HANJ/HIS related patient was free to make his or her own choices
Nor did HANJ/HIS refer patients to the
providers it endorsed for any particular or specific services.
Simply listing Accredo, among other providers, as “preferred”
and acknowledging their contributions to HANJ/HIS’s stateapproved - even state encouraged – charitable activities, is too
attenuated a causal connection.
Absent some evidence, any
Defendants argue that certain forms they submitted to the
government for payment of several claims did not require
certification of their compliance with the AKS. The Court does
not need to address that argument.
evidence, that those particular patients chose Accredo because
of its donations to HANJ/HIS, Plaintiff cannot carry his burden
on an essential element of his claim.
For the reasons expressed above, plaintiff’s motion for
summary judgment will be denied, and defendants’ motion for
summary judgment will be granted.
An appropriate Order will be
Date: December 22, 2016
At Camden, New Jersey
s/ Noel L. Hillman
NOEL L. HILLMAN, U.S.D.J.
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