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United States of America, States of Illinois, Florida and Georgia, and v. Ukranian Village Pharmacy

September 5, 2012

UNITED STATES OF AMERICA, STATES OF ILLINOIS, FLORIDA AND GEORGIA, AND
COMMONWEALTH OF MASSACHUSETTS, EX REL YURY GRENADYOR, PLAINTIFFS,
v.
UKRANIAN VILLAGE PHARMACY, INC.; PHARMALIFE, LLC; MEI SERVICES, INC.;
PHARMALIFE ATLANTA;
PHARMALIFE MINNESOTA;
STORCHAK PHARMACY, LLC;
STORCHAK, LLC;
GLOBAL PHARMALIFE, LLC;
BUCKHEAD PHARMACY, INC.;
PHARMALIFE COLUMBUS;
BUCKHEAD PHARMACEUTICAL ASSOCIATION, INC.;
PHARMALIFE BOSTON;
PHARMALIFE MASSACHUSETTS, INC.; MALECON PHARMACY, INC.; MIKHAIL BOGACHEK A/K/A MICHAEL BOGACHEK;
EDUARD BOGACHEK A/K/A EDWARD BOGACHEK;
SEMEN DINKEVICH;
SVITLANA KHARLAMOVA;
VASILY SHEVCHUK;
YAROLSAW BANDURA;
ALLA BRODECH; WALTER BRODECH;
EMILY CHATSKIS;
YURI CHERNY;
AARON GREENSPAN;
IOURI MELNIK;
RIMA POLOTSKAYA;
GALINA SABIR;
YURI SHAPIRO;
ABRAM STARR; YEVGENY TSRULNIKOV;
BELLA ZARUBINSKY; EDUARD ZINGER; AND
JOHN DOES 15-200, DEFENDANTS.



The opinion of the court was delivered by: Harry D. Leinenweber, JudgeUnited States District Court

Hon. Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

Before the Court are Defendants' Motions to Dismiss. For the reasons stated herein, the Motions are granted and the Complaint is dismissed without prejudice. Leave to replead is also granted.

I. BACKGROUND

The following facts are Relator Yury Grenadyor's ("Grenadyor" or "Relator") version of events, as recited in his Complaint. Grenadyor worked as a pharmacist at Defendant Ukrainian Village Pharmacy ("UV Pharmacy") in Chicago from April 2006 to October 2008. He dispensed prescription medication to customers and billed government healthcare programs such as Medicaid and Medicare for those prescriptions.

UV Pharmacy is a privately-held corporation jointly owned by Defendants Mikhail Bogachek ("M. Bogachek"), his uncle Semen "Simon" Dinkevich ("Dinkevich"), Svitlana Kharlamova ("Kharlamova") and Vasily Shevchuk ("Shevchuk"). (Shevchuk, it appears, entered a pro se appearance in this case but did not file an Answer or a Motion to Dismiss).

How UV Pharmacy is related to other Defendant pharmacies is not entirely clear from the Complaint, but Relator alleges Defendants M. Bogachek and Eduard Bogachek ("E. Bogachek") (collectively, "The Bogacheks") control all Defendant pharmacies (collectively, the "PharmaLife Pharmacies") so thoroughly that each pharmacy is an alter ego of The Bogacheks and thus, the pharmacies are liable for the Bogachek's acts and vice-versa. The Bogacheks own "substantial shares of each" pharmacy. Second Amended Complaint ("SAC"), 6. The Bogacheks also exercise control over the ordering of drugs for each pharmacy, ordering wholesale through the "Buckhead Pharmacy name." Id. (It is unclear if this ordering through the "Buckhead Pharmacy name" takes place through Defendant Buckhead Pharmaceutical Association, Inc. d/b/a Buckhead Pharmacy, Defendant Buckhead Pharmacy, Inc., or both.)

Individual pharmacies are able to place their own orders through the Buckhead Pharmacy name, but if M. Bogachek disagrees with a pharmacy co-owner's ordering, he "berates the co-owner of the relevant location and instructs that person to handle subsequent purchases as he directs." Id. M. Bogachek works out of what the PharmaLife website describes as the "Corporate Headquarters" in Atlanta. He travels to each PharmaLife Pharmacy from time to time to "oversee operations." SAC 16. He is also able to alter each individual pharmacy's inventory numbers via computer from Atlanta.

Several Defendants have been voluntarily dismissed. Six pharmacy entities (doing business through seven pharmacies) remain named Defendants: (1) UV Pharmacy; (2) Storchak Pharmacy, LLC d/b/a PharmaLife Minnesota in Minneapolis, Minnesota; (3) Global PharmaLife, LLC in Creve Coeur, Missouri; (4) Buckhead Pharmaceutical Association, Inc. d/b/a Buckhead Pharmacy in Mayfield Village and d/b/a PharmaLife Columbus in Columbus, Ohio; (5) PharmaLife Massachusetts, Inc. d/b/a PharmaLife Boston; and (6) MEI Services, Inc. d/b/a PharmaLife Atlanta.

Relator alleges multiple types of fraud, but the most particularly pled involves the deliberate, systematic failure of UV Pharmacy to charge customers a copayment ("co-pay") for their prescription drugs, without regard to the customers' ability or inability to pay it. This, Relator alleges, violates the federal Anti-Kickback Statute (the "AKS"). 42 U.S.C. § 1320(b).

Specifically, the Complaint documents that on October 19, 2006, a 78-year-old Palatine woman purchased a 30-day supply of Plavix 75 mg. tablets via Medicare at UV Pharmacy. It notes that "PharmaLife" waived the $1 dollar co-pay, but does not identify which employee waived it. It notes Medicare was subsequently charged $102 for filling this prescription, but does not identify the specific invoice by which the government was charged, the date upon which it was charged, or the employee who submitted the claim to the federal government.

The Complaint lists 11 other examples of co-pay waivers (for a total of 7 customers), each example equally detailed as to the exact day of the co-pay waiver, the type of drug purchased, the age and gender of the customer, the exact amount of the co-pay waived, whether Medicare or Medicaid was billed, and (with two exceptions where approximate dollar amounts were used) the exact amount the government paid for each prescription.

Relator does not allege that UV Pharmacy or its agents certified in writing, prior to billing Medicaid or Medicare, that it would abide by the Anti-Kickback Statute. However, he does allege that "[c]compliance with the AKS is a material requirement of the Medicare and Medicaid programs" (SAC 8) and that "as a result of all these kickbacks, all of the claims for reimbursement of those prescriptions were false under the AKS. This falsity was material to the government's decision to pay those claims. If the government had known that those claims were false, it would not have paid them." SAC 22.

Relator does not cite specific examples of co-pay waivers at the other Defendant pharmacies, but puts forth related allegations in regards to each location. For example, in regards to PharmaLife Minnesota, Relator quotes "Confidential Witness 'B'," a PharmaLife Minnesota employee, who avers that co-pay waivers were standard practice for Medicare and Medicaid prescriptions, without regard to the customer's ability to pay. In the case of Global PharmaLife in Missouri, the Complaint quotes a named employee on a specific date reiterating on the telephone the pharmacy's policy of waiving copays.

Relator further alleges UV Pharmacy included customer "inducements" with each prescription it delivered. The standard inducement package consisted of a tin of caviar, a packet of whole grains, a tin of Riga sprats (oil-packed fish) and a Russian-language television guide. (The pharmacies cater to Russian clientele.) Defendant Kharlamova instructed pharmacy employees to keep a logbook of the inducements delivered, and customers would call to complain when any part of the standard package was missing. Customers with multiple prescriptions got additional tins of caviar (a "bonus" inducement package). The standard package, if delivered on the typical schedule of once a month, had a yearly cost of at least $150; the bonus package cost at least $250 annually. Relator avers he and "Confidential Witness 'A'" routinely saw these inducement gifts being distributed, but does not cite a specific example of an inducement package being delivered to any one customer.

Relator alleges that over-the-counter medicines were also routinely given without cost to Medicare and Medicaid customers as inducements. On April 21, 2008, "PharmaLife" gave a 68-year-old woman in Chicago a free 60-day supply of docusate sodium, a laxative, at no charge as an inducement when she filled her Medicare Lipitor prescriptions at the pharmacy. The government was charged $194.91 for the Lipitor. The ...


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