United States District Court, N.D. Illinois, Eastern Division
United States of America ex rel. Crystal Derrick, Plaintiff-Relator,
Roche Diagnostics Corp., et al., Defendants.
MEMORANDUM OPINION AND ORDER
E. BUCKLO UNITED STATES DISTRICT JUDGE.
qui tam action, plaintiff-relator Crystal Derrick
(“relator”) sues her former employer Roche
Diagnostics Corporation, and its affiliate Roche Diabetics
Care, Inc., (collectively “Roche” or the
“Roche defendants”),  along with Humana, Inc., and
Humana Pharmacy, Inc., (collectively “Humana” or
the “Humana defendants”), alleging that they
violated the False Claims Act (“FCA” or
“the Act”), 31 U.S.C. §§ 3729-3733, by
engaging in a business scheme in violation of the
Anti-Kickback Statute (“AKS”), 42 U.S.C. §
1320a-7b(b), and by retaliating against her for raising
concerns about the lawfulness of that scheme. Roche and
Humana have each filed a motion to dismiss the complaint, and
relator has moved to strike certain documents that Roche
filed in support of its motion. For the reasons that follow,
defendants' motions are denied except that Count IV of
the complaint is dismissed against Humana, and relator's
motion to strike is denied as unnecessary.
following summary is drawn from the second amended complaint
(“SAC” or “the complaint”), whose
factual allegations I accept as true for present purposes.
See AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th
Cir. 2011). The Roche defendants manufacture and market blood
glucose monitoring products used by individuals with
diabetes. SAC ¶¶ 5-7, 49. Humana is an insurance
company that offers health insurance plans nationwide,
including Medicare Advantage plans, which Humana provides
pursuant to contracts with the federal government.
Id. ¶¶ 8, 47-48, 72. Humana maintains
formularies on which it lists products covered by its
Medicare Advantage and other federally funded plans.
Id. ¶¶ 42-49. Humana Pharmacy operates a
mail-order pharmacy called RightSource, which primarily
disburses to members covered by government insurance
programs. Id. ¶ 48.
Medicare Advantage Program, otherwise known as Medicare Part
C, contracts with private insurance companies called Medicare
Advantage Organizations (“MAOs”), of which Humana
is one. The Centers for Medicare & Medicaid Services
(“CMS”) compensates MAOs at a capitated rate for
the delivery of benefits. To participate in the Medicare
Advantage program, MAOs must submit bids to CMS every year in
which they offer to provide services for a specified amount
per member, per month. Each participating MAO must then enter
into a contract with CMS, the terms of which require the MAO
to comply with certain laws, including the AKS and the FCA.
42 C.F.R. § 422.503(a), § 422.504(h). To receive
payment for services provided under the Medicare Advantage
program, MAOs must submit monthly payment requests to CMS
along with monthly reports certifying that “all
information submitted to CMS in this report is accurate,
complete, and truthful.” SAC ¶¶ 72, 74-77.
to the events giving rise to the complaint, Roche contracted
with Humana to make its glucose monitoring products available
on Humana's Medicare Advantage and RightSource
formularies. Relator was a national accounts manager for
Roche from October 2012 to December 2013 and was involved in
overseeing Roche's account with Humana. Id.
¶¶ 4, 48-51. According to the complaint, Humana
notified Roche in March of 2013 that it would be terminating
an agreement under which Roche's products were available
on Humana's RightSource formularies. Id. ¶
50. Relator describes this news as a “significant
blow” to Roche's business. Id.
of 2013, relator discovered that Humana had not complied with
certain terms of its formulary agreements with Roche.
Id. ¶ 51. As a result of Humana's
noncompliance, Roche had paid rebates to Humana that were not
actually owed. Id. Relator met with Bethany Stein, a
contract strategist at Humana, to discuss Roche's rebate
overpayments. Id. ¶ 52. Stein acknowledged the
overpayments and agreed “that it would be appropriate
for Roche to quantify” the amount it had overpaid.
Id. In a subsequent conversation, Stein indicated
that “due to the potentially large size of the
reimbursement” it owed Roche, Humana had decided to
have an auditor perform a formal calculation. Id.
around June of 2013, Roche's finance department
determined that the company had overpaid Humana by $45
million. Id. ¶ 55. Recognizing “an
opportunity to be placed back on Humana's formularies,
” Roche's general manager, Mark Gibley, directed
the company's vice president of finance, David Barnes, to
“do whatever it would take” to preserve the
relationship with Roche, and Barnes instructed relator to
emphasize “Roche's continuation of the Humana
contracts in its anticipated negotiations with Humana
concerning the overpayment.” Id. ¶ 56.
Barnes further instructed relator to discuss the negotiations
only with him, and to refrain from speaking about them with
anyone else. Id.
ensued. Although Humana originally indicated that it would
involve auditors and seek advice from in-house counsel to
determine an appropriate reimbursement amount, defendants
ultimately did neither. Id. ¶¶ 57, 60, 62.
Roche offered to settle the overpayment debt for $27.6
million notwithstanding its $45 million estimate, as it
“did not want to jeopardize” its relationship
with Humana” by requesting the full amount.
Id. ¶ 59. Barnes later sent Stein an email
formally requesting repayment of the rebates, which Stein
viewed as “pretty harsh” and “not
reflective of” defendants' discussions.
Id. ¶ 63. Humana responded that it would pay no
more than $20 million. Id. ¶ 64.
continued over the course of the next several months. In
early December of 2013, defendants signed a contract to place
Roche products back on Humana's formularies and to
exclude competing brand products from Humana's
formularies. Id. ¶ 69. The same week, Humana
paid Roche a sum that, according to the complaint, did not
exceed $11 million to cover its overpayment debt.
Id. ¶ 70. Relator alleges that Roche reserved
the right to recover the full amount owed if Humana did not
satisfactorily perform its obligations under the parties'
new agreement. Id.
alleges that she was concerned that defendants'
arrangement ran afoul of the AKS and repeatedly expressed her
concerns to Barnes and to other Roche executives.
Id. ¶¶ 67-68, 79. Although she had
originally been praised for her discovery of Roche's
overpayment to Humana, she was terminated shortly after the
parties executed the December 2013 agreement. The putative
reason for relator's termination was a mistake Roche
claimed she had made two months earlier, when she provided a
client with pricing information that the company had not
approved. Id. ¶¶ 69-70, 80-84, 87-88, 90.
In relator's view, the real reason she was fired was her
effort to blow the whistle on defendants' unlawful
asserts four claims under the FCA. In Count I, she alleges
that Humana presented, and Roche caused to be presented,
false claims to CMS in violation of § 3729(a)(1)(A). In
Count II, she claims that Humana made material false
statements, and that Roche caused material false statements
to be made, in conjunction with claims Humana submitted to
CMS in violation of § 3729(a)(1)(B). In Count III, she
alleges that defendants violated § 3729(a)(1)(C) by
engaging in a conspiracy to commit the violations asserted in
Counts I and II. And in Count IV, relator asserts that
defendants retaliated against her because of her efforts to
stop the aforementioned FCA violations.
move for dismissal on the ground that the complaint fails the
particularity and plausibility standards of Rule 9(b) and
Rule (8). They argue that dismissal is appropriate for the
additional reason that the conduct relator attributes to them
in the complaint falls within the AKS's safe harbor
provisions and is consistent with ...