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United States ex rel. Banigan v. PharMerica, Inc.

United States Court of Appeals for the First Circuit

February 19, 2020, Decided

No. 18-1487

Opinion

 [*136]  LIPEZ, Circuit Judge. James Banigan and Richard Templin (collectively, "relators") brought this qui tam action under the False Claims Act ("FCA") and several of its state law equivalents alleging that PharMerica, Inc. ("PharMerica") defrauded the government by participating in a Medicaid scheme that rewarded it financially for incentivizing physicians to change patients' prescriptions to the drug manufacturer Organon's antidepressant medications. The district court dismissed the relators' FCA action under the public disclosure bar, which excludes from the subject matter jurisdiction of federal courts qui tam actions that are "based upon the public disclosure of allegations or transactions" in a civil [**2]  "hearing," among other sources. 31 U.S.C. § 3730(e)(4)(A) (2006).1

 [*137]  Although we share the district court's view that an earlier FCA action involving the same scheme triggers the public disclosure bar, we conclude, contrary to the district court, that Banigan falls within an exception to that bar as an "original source of the information." Id. We therefore reverse the district court's dismissal of the FCA action against PharMerica and remand for further proceedings.

A. Legal Background

] "The FCA prohibits the knowing submission of false or fraudulent claims to the United States." United States ex rel. Poteet v. Bahler Med., Inc., 619 F.3d 104, 107 (1st Cir. 2010) (citing 31 U.S.C. § 3729(a)). The relators' FCA claims are based on PharMerica's alleged violations of ] the Anti-Kickback Statute ("AKS"), which prohibits the solicitation or receipt of "any remuneration (including any kickback, bribe, or rebate)" in exchange for purchasing or ordering any good or item "for which payment may be made in whole or in part under a Federal health care program." 42 U.S.C. § 1320a-7b(b)(1)(B). The AKS was designed to prevent medical providers from making decisions based on improper financial incentives rather than medical necessity and to ensure that federal health care programs do not bear the costs of such decisions. See United States v. Patel, 778 F.3d 607, 612 (7th Cir. 2015). The AKS was amended [**3]  in 2010 "to create an express link to the FCA," Guilfoile v. Shields, 913 F.3d 178, 189 (1st Cir. 2019), but the courts had already recognized that "liability under the False Claims Act can be predicated on a violation of the Anti-Kickback Statute." United States ex rel. Westmoreland v. Amgen, Inc., 812 F. Supp. 2d 39, 54 (D. Mass. 2011) (collecting cases).

] When a relator brings a qui tam action on behalf of the government, the United States is entitled, but not required, to intervene and take over the prosecution of the case. 31 U.S.C. § 3730(b)(2). If the government declines to intervene, the relator has the right to proceed with the suit on the government's behalf. Id. § 3730(c)(3). Whether the government intervenes or not, the relator is usually entitled to receive a percentage of any settlement or any damages that are awarded. Id. § 3730(d)(1)-(2).

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950 F.3d 134 *; 2020 U.S. App. LEXIS 5060 **; 2020 WL 813258

UNITED STATES, ex rel. JAMES BANIGAN and RICHARD TEMPLIN; STATE OF FLORIDA, STATE OF ILLINOIS, STATE OF INDIANA, STATE OF LOUISIANA, COMMONWEALTH OF MASSACHUSETTS, STATE OF MICHIGAN, STATE OF NEW MEXICO, STATE OF NEW YORK, STATE OF TENNESSEE, STATE OF TEXAS, COMMONWEALTH OF VIRGINIA, STATE OF NORTH CAROLINA, ex rel. JAMES BANIGAN and RICHARD TEMPLIN, Plaintiffs, Appellants, STATE OF CALIFORNIA, STATE OF COLORADO, STATE OF CONNECTICUT, STATE OF DELAWARE, DISTRICT OF COLUMBIA, STATE OF GEORGIA, STATE OF HAWAII, STATE OF MARYLAND, STATE OF MINNESOTA, STATE OF MONTANA, STATE OF NEVADA, STATE OF NEW HAMPSHIRE, STATE OF NEW JERSEY, STATE OF OKLAHOMA, STATE OF RHODE ISLAND, STATE OF WISCONSIN, CITY OF CHICAGO, ex rel. JAMES BANIGAN and RICHARD TEMPLIN, Plaintiffs, v. PHARMERICA, INC., Defendant, Appellee, OMNICARE, INC.; ORGANON PHARMACEUTICALS USA, INC.; ORGANON USA, INC.; SCHERING PLOUGH CORP.; AKZO NOBEL NV.; MERCK & CO., INC.; ORGANON BIOSCIENCES N.V.; ORGANON INTERNATIONAL, INC., Defendants.

Prior History:  [**1] APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS. Hon. Rya W. Zobel, U.S. District Judge.

United States ex rel. Banignan v. Organon USA Inc., 883 F. Supp. 2d 277, 2012 U.S. Dist. LEXIS 76130 (D. Mass., June 1, 2012)

CORE TERMS

disclosure, Tablet, discount, pharmacy, fraudulent, prescriptions, long-term, rebates, tam, switching, conversion, patients', antidepressants, reimbursement, email, manufacturers, intervene, interchange, therapeutic, kickbacks, remuneration, pharmacist, prescribed

Governments, Legislation, Effect & Operation, Amendments, Labor & Employment Law, False Claims Act, Scope & Definitions, Jurisdictional Bar, Employer Liability, Scope & Definitions, Public Health & Welfare Law, Providers, Payments & Reimbursements, Abuse & Fraud, Qui Tam Actions, Civil Procedure, Pleading & Practice, Pleadings, Complaints, Appeals, Standards of Review, De Novo Review, Jurisdiction, Subject Matter Jurisdiction, Jurisdiction Over Actions, Responses, Defenses, Demurrers & Objections, Motions to Dismiss, Reviewability of Lower Court Decisions, Preservation for Review, Interpretation