The opinion of the court was delivered by: Judge James B. Zagel
MEMORANDUM OPINION AND ORDER
In a twenty-four count qui tam complaint, Relator alleges that Defendant OmniCare, Inc. submitted false claims to the government of the United States and numerous individual states. Relator was an employee of Defendant, and he further alleges retaliatory discharge for his actions in uncovering Defendant's alleged fraud.
Count I is a claim under 31 U.S.C. 3729(a)(1)(G) for unlawful retention of overpayments under the federal Medicare and Medicaid programs in 2000-2005. The overpayments were rooted in allegedly false or fraudulent claims made by Defendant's pharmacies, later revealed to corporate management through an audit process and yet still retained by Defendant. Count II is brought under the same provision and relates to allegedly retained overpayments made to pharmacies that OmniCare had acquired in the one-year period preceding a 2008 audit. Count III alleges a false claim in connection with OmniCare's alleged illicit stockpiling of the drug Synagis. Count IV alleged a Medicaid pricing scheme.*fn1 Count V encapsulates the conduct alleged in Counts I-III as fraud on Medicare under the FCA. For clarity's sake I deem its paragraphs merged into Counts I-III. Counts VI-XXII are claims under twenty-eight state false claims acts. Count XXIII repackages the alleged fraud on the state Medicaid programs described in counts VI-XXII on the basis that the federal government reimbursed the states and was therefore harmed. Count XXIV is the federal retaliation claim.
Viewed in the light most favorable to the non-movant, the factual background is as follows. OmniCare, Inc. is the nation's largest provider of pharmaceuticals and related ancillary services to long-term health care institutions, such as assisted living facilities, retirement centers, and hospices. The ancillary services include things such as intravenous and nutrition products, respiratory therapy, and assorted durable medical goods. OmniCare owns and operates these services at facilities in several states. In 2008, Defendant generated roughly 100 million dollars in revenue from these ancillary services, sixty percent - or 60 million dollars - of which came from the government programs Medicare and Medicaid.
Relator worked for the defendant, OmniCare, as Vice President for Internal Audit. In that capacity, he conducted two key audits of OmniCare's Medicare and Medicaid claims, one for claims submitted in 2000-2005 (the "Wave I" audit) and one for claims from 2008 ("Wave II"). Wave I took place in 2007. It consisted of an audit of thirty-nine claims spanning eighteen facilities per year from 2000-05. This number does not reflect all claims, rather it was a "probe sample" audit, which Relator describes in his complaint as "one which lacks random selection such that results could be statistically extrapolated." Its purpose was to inform OmniCare whether systemic problems may exist with respect to claims made on Medicare and State Medicaid and to prompt further claims-level investigation as needed. Relator asserts that Wave I did, in fact, inform OmniCare of such problems. Relator claims that OmniCare should have inquired further but did not do so. Rather, OmniCare provided a limited repayment to Medicare that did not reflect the full extent of overpayments and falsely proclaimed the federal government to have been made whole. OmniCare allegedly made no repayment to the State Medicaid programs.
Wave II took place in 2008. Wave II repeated essentially the same process as that in Wave I, this time for pharmacies newly acquired by OmniCare. It was limited to the year 2008 and examined thirty claims across fifteen facilities. Relator alleges that Wave II made OmniCare aware of claims and payments made to pharmacies for which there was no substantiation, but that OmniCare took no corrective action in response to Wave II.
Relator further alleges that OmniCare submitted false claims for Medicaid reimbursements with respect to the pediatric drug Synagis. Relator alleges that OmniCare intentionally stockpiled excess amounts of Synagis in contravention of FDA-approved discard instructions. OmniCare would then use the inappropriatelyretained quantities to fill additional prescriptions, all the while purchasing more (essentially unnecessary) Synagis under the pretext that the retained quantities were actually discarded per the label instructions. OmniCare is claimed to have used those purchases as the basis for further Medicare reimbursement.
Relator presented the results of Wave II to OmniCare's Internal Audit committee in a formal document. In the document, he noted "deficiencies" with respect to government claims. In addition to the deficiencies noted in the document, he claims to have verbally stated that the deficiencies resulted in "fraud" on Medicare and State Medicaid programs. Thereafter, OmniCare's CEO is alleged to have told Relator to "begin looking for other employment."
Relator claims this none-too-subtle suggestion meant that OmniCare effectively discharged him for lawful conduct that was in furtherance of an FCA action.
i. Counts I and II - Liability Under the Amended FCA.
Relator's main federal allegation is that Defendant has violated the False Claims Act, as amended in the Fraud Enforcement and Recovery Act ("FERA" or the "amended FCA") of 2009, see 31 U.S.C. § 3729(b)(3), and the Patient Protection and Affordable Care Act of 2010 (PPACA). Pub. L. 111-148, 124 Stat. 119.
Relators have clarified through further briefing that their core claim
is one under 31 U.S.C. § 3729(a)(1)(G), which establishes that any
person who knowingly makes, uses, or causes to be made or used, a
false record or statement material to an obligation to pay or transmit
money or property to the Government, or knowingly conceals or
knowingly and improperly avoids or decreases an obligation to pay or
transmit money or property to the Government is liable to the United
States for a civil penalty. 31 U.S.C. § 3729(a)(1)(G).*fn2
As amended on May 20, 2009 by FERA, the FCA defines an
"obligation" as, among other things, "an established duty, whether or
not fixed, arising...from the retention of an overpayment." 31 U.S.C.
§ 3729(b)(3). Section 3729(a)(1)(G) claims are often characterized as
"reverse false claims," as they implicate situations in which the
charge is falsehood in paying monies to the United States rather than
in securing payment from the government. See, e.g., United States ex
rel. Lamers v. City of Green Bay, 998 F. Supp. 971 (E.D. Wis. 1998)
(interpreting pre-FERA version of FCA).
There have been two important changes to the FCA and other relevant federal law that are at issue here. The first was the addition of a definition for the term "obligation" as described above. 31 U.S.C. § 3729(b)(3). The second is the enactment of PPACA. This broad health care reform legislation included a provision targeting retention of an overpayment. Specifically, as applies here, § 6402(a) of PPACA states that "[a]n overpayment must ...