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Carmel v. CVS Caremark Corporation

United States District Court, N.D. Illinois, Eastern Division

June 26, 2015

Richard J. Carmel, Plaintiff,
v.
CVS Caremark Corporation, et. al., Defendants.

MEMORANDUM OPINION AND ORDER

ELAINE E. BUCKLO, District Judge.

In these related qui tam actions, relator Richard J. Carmel alleges that CVS Caremark Corporation-a pharmacy and healthcare services provider-and its affiliates violated, and conspired to violate, the federal False Claims Act, 31 U.S.C. § 3730 ("FCA"), and the Anti-Kickback Statute, 42 U.S.C. § 1320a-7b(b) ("AKS"), through certain discount programs they offered to CVS pharmacy customers.[1] Relator claims that these programs violated the AKS by incentivizing customers covered by Medicare and/or Medicaid to purchase prescription drugs at CVS, and by remunerating such customers through price reductions that were neither disclosed nor passed on to these federal programs. Defendants violated the FCA, relator asserts, by presenting claims for payment that falsely certified compliance with the AKS, and by making or using false records for the purpose of seeking payment of false or fraudulent claims.

Defendants articulate multiple grounds for dismissing relator's claims under Fed.R.Civ.P. 12(b)(6), several of which appear to have merit, and some of which relator concedes.[2] But because I conclude that under the law of this circuit, the FCA's "public disclosure" bar compels dismissal of both actions for lack of subject matter jurisdiction, I begin and end with that issue.

I.

The FCA is "the primary vehicle by the Government for recouping losses suffered through fraud." U.S. v. Sanford-Brown, Ltd., ___ F.3d ___, 2015 WL 3541422, at *4 (7th Cir. 2015) (quoting 31 U.S.C. § 3729 et seq.). It authorizes, in addition to actions by the Attorney General, qui tam suits by private citizens ("relators") to recover money the government paid based on false or fraudulent claims. Glaser v. Wound Care Consultants, Inc., 570 F.3d 907, 912 (7th Cir. 2009). If the qui tam action is successful, the relator is entitled to a "substantial share" of the funds recovered. Id.

To ensure that qui tam suits are brought by individuals having " first-hand knowledge of fraudulent misconduct, " id. at 918 (original emphasis), rather than by "opportunists trying to capitalize on publicly disclosed allegations of wrongdoing, " id. at 915, the FCA includes a public disclosure bar, which requires courts to dismiss qui tam actions:

if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed-
...
(iii) from the news media
...
unless... the person bringing the action is an original source of the information.

31 U.S.C. § 3730(e)(4)(a)(2010).

To determine whether this bar applies, courts in this circuit apply a three-step analysis, asking: 1) whether the relator's allegations have been "publicly disclosed"; 2) whether the lawsuit is "substantially similar to" the publicly disclosed information; and, if so, 3) whether the relator is nevertheless an "original source" of the information. Glaser, 570 F.3d at 913. The Seventh Circuit has explained that the public disclosure bar applies not only where an allegation of fraud has already been made, but also where the "facts disclosing the fraud itself are in the government's possession or the public domain." U.S. ex rel. Absher v. Momence Meadows Nursing Center, Inc., 764 F.3d 699, 708 (7th Cir. 2014).

II.

Relator's complaints challenge several discount programs offered to CVS customers. The first is CVS pharmacy's "ExtraBucks" rewards program, which provides customers "with single points' for each prescription filled, and then provid[es] customers a five dollar discount coupon for each 10 prescriptions filled or refilled, for use in purchase of goods, wares and merchandise" at CVS stores. Complaint in 13 C 5930 ("5930 Cmplt.") at ¶ 17. In this connection, relator describes a ...


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