United States District Court, N.D. Illinois, Eastern Division
MEMORANDUM OPINION AND ORDER
Robert Blakey, United States District Judge.
and Plaintiffs Sarah Castillo Baier (Castillo-Baier) and Rita
Svendsen Baier (Svendsen-Baier) (collectively Relators) have
brought a qui tam action under the False Claims Act
(FCA), 31 U.S.C. § 3729 et seq., (Counts I
& II) and its Illinois counterpart, the Illinois False
Claims Act (IFCA), 740 ILCS Comp. Stat. 175/1 et
seq., (Counts III & IV) on behalf of the United
States and the State of Illinois. .
sue Defendants Walgreen Co. (Walgreens) and James G.
Kulekowskis, alleging that they induced patients and
providers to use a Walgreens specialty pharmacy location by:
(1) routinely and systematically waiving copayments for
Medicaid and Medicare patients; and (2) automatically
refilling prescriptions for these same patients. Id.
¶¶ 3, 185. On September 27, 2018, Defendants
Walgreens and Kulekowskis moved to dismiss Relators'
Second Amended Complaint (SAC). .
August 7, 2018, the United States and State of Illinois
(collectively the Government) filed a Joint Complaint in
Intervention (JCI) against Defendants Walgreens, Kulekowskis,
and Christopher G. Hayes pursuant to the FCA (Counts I & II)
and ICFA (Counts III & IV), alleging that they
automatically refilled prescriptions for Illinois Medicaid
patients at the same Walgreens specialty pharmacy at issue in
Relators' SAC.  ¶¶ 1, 3. The Government
also brought claims for common law fraud (Count V), unjust
enrichment (Count VI), and payment by mistake (Count
based upon these same allegations.  ¶¶ 104-11.
The Government, unlike Relators, did not bring claims based
upon any copayment waivers. See generally . On
September 27, 2018, Defendants Walgreens, Kulekowskis, and
Hayes moved to dismiss the Government's JCI. .
reasons explained below, this Court grants both motions to
dismiss,  .
following facts come from the Government's JCI, , and
Relators' SAC, .
federal government and state of Illinois jointly fund and
administer the Medicare and Medicaid programs in Illinois.
 ¶¶ 7-8;  ¶¶ 21, 29-33.
Walgreens is an Illinois corporation authorized to do
business in the United States, Puerto Rico, and Guam, with
its corporate office in Deerfield, Illinois.  ¶ 9.
Walgreens operates a chain of retail drugstores that sell,
among other items, prescription drugs. Id. In
addition to over 8, 000 retail stores, Walgreens owns and
operates more than 700 specialty pharmacies through its
Specialty Pharmacy division. Id. This division
provides specialized medication for complex, genetic, rare,
and chronic health conditions. Id. This case
concerns Walgreens' C&M Specialty Pharmacy (C&M)
located in Glenview, Illinois. Id. ¶ 3.
James G. Kulekowskis, Jr. is a Doctor of Pharmacy (Pharm.D)
and licensed pharmacist in Illinois and Florida. Id.
¶ 10. At all times relevant to this case, Kulekowskis
worked as the pharmacy manager of C&M, with
responsibility for overseeing all business and operations
there. Id. Defendant Christopher Hayes is a licensed
pharmacist. Id. ¶ 11. At all times relevant to
this case, Hayes worked as the supervisor of all pharmacists
and technicians employed at the C&M location.
Id. Both Kulekowskis and Hayes reside in Illinois.
Id. ¶¶ 10-11.
Castillo -Baier resides in Illinois and worked for Walgreens
from July 2002 through July 2017.  ¶ 15. She holds a
pharmacy technician certification and began working as a
Senior Certified Technician at Walgreens in 2007.
Id. In May 2013, Walgreens transferred Castillo
-Baier from one of its retail pharmacy locations in Arlington
Heights to C&M. Id. ¶ 16. She worked as a
pharmacy technician at C&M from May 2013 through December
2013, after which Walgreens transferred her to C&M's
finance department. Id. ¶ 17. Castillo -Baier
worked in C&M's finance department from January 2014
until she resigned, effective July 5, 2017. Id.
Svendsen -Baier also resides in Illinois and worked for
Walgreens from February 2002 until November 2013.
Id. ¶ 18. She worked as a Certified Pharmacy
Technician until November 2011, when she became a student
pharmacist/pharmacy intern and no longer required
certification. Id. Svendsen -Baier worked with
Defendant Kulekowskis for approximately one year between 2003
and 2004, and from time to time between May and December
2010, at C&M. Id. ¶ 19.
The Medicaid Program
Medicaid Program, 42 U.S.C. § 1396 et seq., is
a government health insurance program funded jointly by the
federal and state governments to assist people and families
with low income and limited resources.  ¶ 21. The
Centers for Medicare and Medicaid Services (CMS), within the
United States Department of Health and Human Services (HHS),
administers Medicaid on the federal level. Id.
¶¶ 22-23. Within broad federal rules, however, each
state decides who is eligible for Medicaid, the services
covered, payment levels for services, and administrative and
operation procedures. Id. ¶ 23. The state
directly pays the providers of Medicaid services and obtains
the federal share of the payment from accounts drawn on funds
of the United States Treasury. Id.
of prescription drugs for Medicaid patients who participate
in the Medicaid program are eligible for reimbursement for
covered prescriptions. Id. ¶ 24. To enroll in
the Illinois Medicaid program, pharmacies must submit an
enrollment application that contains, in relevant part, a
certification that “all of the information provided in
this application process is true, correct and complete and
that the enrolling provider is in compliance with all
applicable federal and state laws and regulations.”
Id. ¶ 26. Once enrolled in the Illinois
Medicaid program, each pharmacy must sign the Illinois
Medicaid Provider Agreement, which provides, in part, that
providers will comply with all current and future program
policy and billing provisions. Id. ¶ 27.
Defendant Walgreens, doing business as C&M Pharmacy LLC,
executed such a Provider Enrollment Agreement with the
Illinois Medicaid program dated July 1, 2006. Id.
submitted to Illinois Medicaid may also be submitted
electronically. With respect to electronically-filed claims,
the Illinois Medicaid Policy Handbook states, in relevant
Paper claim forms all contain a certification statement,
which the provider is required to sign. By signing the form,
the provider is attesting to the accuracy of the information
Electronic claims and claims created by the Department do not
contain a certification statement, nor is there a way for the
provider to sign electronic claims at the time of submittal.
Instead, the Department has instituted a post-payment
certification as described below.
A copy of Form HFS 194-M-C, Billing Certification,
accompanies each remittance advice which contains an
electronically submitted paid service or a service paid as a
result of a claim created by the Department.
It is the responsibility of the provider who provided the
service and submitted the claim for payment to review the
Remittance Advice and the Billing Certification form
attesting the accuracy of the information therein.
The same signature requirements that apply to the signing of
a paper claim, as described in Topic 112.7.1, apply to Form
 ¶ 43. Form 194-M-C, the billing certification form,
contains the following language: “I understand payment
is made from State and Federal funds and any falsification or
concealment of a material fact may be cause for prosecution
or other appropriate legal action.” Id. ¶
to Relators, Walgreens received Form 194-M-C in connection
with each claim submitted electronically to Illinois
Medicaid. Id. ¶ 46.
The Medicare Program
Medicare Program, 42 U.S.C. § 1395 et seq., is
a government health insurance program funded jointly by the
federal and state governments to assist the elderly and
disabled. Id. ¶ 29. CMS administers Medicare on
the federal level. Id. ¶ 30. Medicare
reimburses health care providers for covered services given
to Medicare patients. Id. ¶ 33. In doing so,
Medicare determines what types of services are covered and
therefore reimbursable, and at what rate it will reimburse
the covered service. Id. Providers enrolled in the
Medicare program agree to submit claims only for medically
and reasonably necessary services covered under the program,
and to only seek compensation to which the provider is
legally entitled. Id.
such as Walgreens who wish to enroll in Medicare must
complete Medicare Enrollment Application - Clinics/Group
Practices and Certain Other Suppliers, Form CMS-855B.
Id. ¶ 34. Form 855B contains the following
I agree to abide by the Medicare laws, regulations and
program instructions that apply to this supplier. The
Medicare laws, regulations, and program instructions are
available through the Medicare contractor. I understand that
payment of a claim by Medicare is conditioned upon the claim
and the underlying transaction complying with such laws,
regulations, and program instructions (including, but not
limited to, the Federal anti-kickback statute and the Stark
law), and on the supplier's compliance with all
applicable conditions of participation in Medicare.
Id. ¶ 35.
C&M Operating Structure
specialty pharmacy for complex, genetic, rare, and chronic
health conditions, C&M provides medications that are
often much more expensive than medications provided at the
pharmacies in Walgreens' retail stores.  ¶ 29.
C&M provides pharmaceutical services for patients at home
as well as patients in medical clinics. Id. ¶
30. For patients in medical clinics, C&M sends their
medications or prescriptions directly to the clinic; for home
patients, a Walgreens-employed driver, or UPS, FedEx, and/or
the U.S. Postal Services will deliver medications or
prescriptions directly to the patient. Id.
assigns each pharmacist or technician to a particular
“department” within the store. Id.
¶ 31. These departments include mental health,
transplant, HIV, and biologics. Id. C&M then
categorizes patients into these departments based upon the
type of medications they need, and each department fills or
refills their prescriptions. Id. Accordingly, when a
patient needs a prescription entered, the pharmacist or
technician for that patient's designated department
enters the prescription. Id.
Automatic Refill Allegations
typical medication prescription requires a patient to take
the medication once per day, every day. Id. ¶
32. A typical prescription is written for a 30-day supply of
the medication, and each prescription allows for a finite
number of refills. Id. Thus, a patient taking such
medication once per day, every day, will run out of
medication after 30 days. Id.
to May 1, 2013, C&M refilled Medicaid patient
prescriptions under an “automatic refill” or
“auto refill” protocol. Id. ¶ 33.
Under such protocol, the pharmacy automatically refilled
prescriptions every 30 days (or other time period depending
upon the medication), until all prescribed refills ran out.
April 2013 Provider Notice
April 24, 2013, HFS issued a Provider Notice to all
pharmacies participating in Illinois' Medicaid program
advising that effective May 1, 2013, Illinois Medicaid would
no longer allow pharmacies to automatically refill
prescriptions, and that “[a]ll prescription refills
must be initiated by a request from the prescriber,
participant, or other person acting as an agent of the
participant, e.g., a family member.” Id.
¶ 2. The Provider Notice also explained:
The possession of a prescription with remaining refills
authorized does not, in itself, constitute a request to
refill the prescription. The department will not reimburse a
pharmacy for any prescription claim that has been filled
using an auto refill process. Any claim for a prescription
filled without a request from the prescriber, participant
[i.e., the patient], or agent of the participant will be
subject to recovery. Claims for prescriptions that have been
filled using auto refill and inadvertently billed to the
department must be reversed by the pharmacy.
Id. According to the Government, the auto-refill
prohibition “protects limited government resources from
waste and abuse, and also protects public health and safety
by preventing prescription drugs from unnecessarily being
sent to patients.” Id. ¶ 5. In
particular, sending unnecessary prescriptions to patients can
result in an individual taking a medication even after his or
her provider intended that the prescription be discontinued,
or when the prescriber intended a dosage change. Id.
Moreover, receiving unnecessary prescriptions could result in
the patient selling the medication on the open market.
C&M's Reaction to the Provider Notice
to the Government, the Provider Notice had the potential to
negatively impact C&M's pharmacy sales; based upon
Illinois Medicaid claims data, Medicaid-covered prescriptions
constitute approximately 70% of sales at C&M.
Id. ¶ 39. Thus, C&M faced a significant
overhaul in its method of refilling prescriptions, as well as
a threat to sales, due to the auto-refill prohibition.
Id. According to the Government,
“Defendants” responded to this threat by advising
all of its pharmacists and pharmacy technicians to: (1)
automatically refill all prescriptions; and (2) falsely enter
a notation in the computer system that the provider (such as
a nurse in the case of clinic patients) or the patient (in
the case of home patients) specifically requested the refill.
Id. ¶ 40. The Government fails to specify which
of the three named Defendants-Kulekowskis, Hayes, and
Walgreens-made this advisement. Id.
2013-when Castillo-Baier worked at C&M-C&M refill
technician Aneta Kuligowska trained Castillo-Baier on the new
Illinois Medicaid Auto-Refill Prohibition and
“C&M's method for fraudulently getting around
the policy.” Id. ¶ 41. According to the
Government, every day at C&M, the store generated a
computer printout showing a list of patients for whom 30 days
had passed since the patient's last prescription was
filled. Id. ¶ 42. Despite the Provider Notice,
C&M pharmacists and technicians then auto-refilled each
of the prescriptions for patients on the list, regardless of
whether the patient or a provider requested a refill.
Id. When a patient or provider did not specifically
request a refill for a Medicaid-covered prescription, C&M
employees made “false and fraudulent notation[s]”
that a patient or a nurse called to request the refill, when
in fact, no such refill was requested. Id. ¶
43. And based upon these auto-refilled prescriptions,
Walgreens submitted claims for the prescriptions to Illinois
Government offers C&M pharmacy technician Candice
Bundzinski's day-to-day experience as an example of the
allegedly fraudulent auto-refill process. Id.
¶¶ 56-61. Bundzinski served as a pharmacy
technician at C&M from December 2013 through August 2014.
Id. ¶ 56. She began each work day by printing
out a list generated by the auto-refill system containing 15
pages of patient names. Id. ¶ 57. From that
list, Bundzinski then identified which patients required a
prescription refill based upon their 30-day medication cycle.
Id. Bundzinski and other pharmacy technicians would
then process these orders and submit all requests for
prescriptions to C&M's laboratory. Id.
¶ 58. But according to Bundzinski, she and other C&M
employees only contacted 15 percent of patients to determine
whether they actually wanted their prescriptions refilled.
she automatically refilled the prescription, Bundzinski then
typed a note into C&M's computer system advising that
the patient requested the refill, even if she never spoke to
the specific patient. Id. ¶ 59. Based upon
C&M's training, Bundzinski believed these notations
to be necessary for audit purposes. Id. Bundzinski
never saw or otherwise knew of Illinois Medicaid's
prohibition of prescription auto-refills during her tenure
with C&M. Id. ¶ 60.
C&M's Software System
this time period, Walgreens allowed C&M to use a computer
system not associated with the rest of Walgreens'
network. Id. ¶ 44. Generally, Walgreens and all
of its affiliated stores used the Intercom Plus System, while
C&M used a different Citrix-based system called
CarePoint. Id. Walgreens did not transition C&M
to its Intercom Plus System until late 2016. Id.
According to the JCI, as late as January 2015-over a year
after the auto-refill prohibition-C&M's CarePoint
system designated all patients, including Illinois Medicaid
patients, as participating in C&M's auto-refill
program unless a patient specifically opted out of the
service. Id. ¶ 45.
computer system automatically marked the initials of the
individual logging into the computer and the time and date of
that entry. Id. ¶ 46. Thus, when a pharmacist
or technician entered a note in the computer system that a
nurse or patient had requested a refill-in the
“disclosure field” of a patient's profile-the
computer system placed a date and time stamp on each entry
and recorded the initials of the particular pharmacist or
technician. Id. ¶ 46. According to the
Government, even when technicians had not contacted a
customer, “Defendants” instructed technicians to
input a notation reflecting that they had made contact.
Id. ¶ 48. The Government does not specify which
individual defendants made such instructions. See
situations, technicians input notations such as “RN
REQ. REFILLS, ” and “other non-specific
phrases” every 30 days. Id. For example,
C&M pharmacy technician Suhail Ishaque routinely made a
note on his schedule that a patient received Illinois
Medicaid, and thus that he needed to notate “Make
Disclosure that patient requested” or “Make
Disclosure that nurse requested.” Id. ¶
49. Ishaque made such notes only for Illinois Medicaid
patients. Id. ¶ 50.
Provider Bulletin and C&M's Subsequent
October 8, 2014, the Illinois HFS sent Provider Bulletin
P-200 14-06 (the Provider Bulletin) to all enrolled
pharmacies regarding the Illinois Handbook for Providers of
Pharmacy Services (the Handbook), reminding pharmacies of the
State's auto-refill prohibition. Id. ¶ 52.
Shortly after receiving the Provider Bulletin, Defendant
Hayes, in his role as a pharmacist and technician supervisor
at C&M, gave all C&M pharmacists and technicians a
copy of the Provider Bulletin. Id. On the first page
of the employees' copies Hayes wrote:
Att: Please read bracketed areas. All refills for [Illinois
Department of Public Aid] (only) must be noted in disclosure
notes that the patient requested. This note also needs to be
added when refilling Medicare B patient meds.
the issuance of the Provider Bulletin, Defendants Kulekowskis
and Hayes called a meeting on November 14, 2014. Id.
¶ 62. The Government alleges that the meeting was
triggered in part by C&M's receipt of a government
subpoena requesting information regarding prescription refill
practices since May 2013. Id. ¶ 62. Four days
before the meeting-when C&M first received the
subpoena-Hayes sent the following email to all pharmacists
and technicians and copied Kulekowskis:
Subject: re: ILLINOIS MEDICAID PATIENTS
ALL MEDICAID PATIENTS MUST HAVE A DISCLOSURE NOTE EVERYTIME A
MEDICATION IS DISPENSE[D] STATING THAT “PATIENT (or
representative) HAS REQUESTED A REFILL/REFILLS FOR
(medication 1), (medication 2), (medication 3) AND SO ON. THE
NOTES NEED TO BE DATED BEFORE THE MEDICATION IS SENT.
REMEMBER THIS APPLIES TO MEDICARE D PATIENTS THAT HAVE
ANYTHING BILLED TO ILLINOIS MEDICAID.
THIS APPLIES TO PHARMACISTS AND TECHNICIANS.
ABSOLUTELY NO EXCEPTIONS!!!!!!!
THE SAME APPLIES FOR MEDICARE B.
THIS ALSO INCLUDES ALL MENTAL HEALTH PATIENTS IN GROUP HOMES
OR CILA'S. THE NOTE SHOULD READ THAT “RN/CASE
WORKER/PATIENT REQUESTED REFILL OF ……….
I have looked at some order[s] that were billed to Illinois
Medicaid in the last month and those notes are not in
disclosures. A DISCLOSURE NOTE MUST BE ENTERED FOR
Id. Kulekowskis referred to the meeting as a
“CYOA (Cover Your Own Ass) Meeting.” Id.
¶ 63. Castillo-Baier, along with all C&M pharmacists
and technicians, attended the CYOA meeting. Id.
November 14 meeting, Kulekowskis presided and told the room
that he “want[ed] everybody on the same page”
regarding the subpoena and wanted to make sure “they
were all saying the same thing if questioned.”
Id. ¶ 64. Kulekowskis then told the meeting
participants to say “that they do not do any
auto-refills, but do call all patients to remind them when
their prescriptions are about to run out and would need to be
refilled.” Id. ¶ 65. He added that the
pharmacists and technicians must continue to enter the
disclosure notes for each patient stating that he or she had
requested a refill. Id. Further, Kulekowskis advised
the group that in addition to computer disclosure notes, they
should start making handwritten notes on the daily computer
printouts showing all refills to be filled for a particular
day. Id. ¶ 66.
Government offers “Patient A” as an example of a
C&M customer and Illinois Medicaid patient not contacted
monthly for refill authorization. Id. ¶ 77.
Patient A remained a C&M customer from May 24, 2013
through October 19, 2014. Id. During this time,
Patient A never called C&M to request medication refills,
yet every 30 days C&M refilled Patient A's three
medications. Id. ¶¶ 77-78.
example, on July 21, 2014, C&M transmitted a refill claim
for payment to Illinois Medicaid for Patient A's Atripla
medication. Id. ¶ 80. According to the
Government, on the transmission form C&M made a specific
representation as to the “goods actually provided to
Patient A.” Id. Field “D2” on the
form correctly indicates Patient A's Atripla prescription
number. Id. Field “DF” then indicates
that Patient A's physician authorized six refills on the
original prescription. Id. Field “D3”
indicates the actual fill number for a prescription.
Id. For this July 21 transaction, a C&M employee
allegedly typed “02” into the “D3”
field, making a specific representation that this constituted
the first refill on the original prescription. Id.
But C&M's telephone logs do not contain any record of
phone contact with Patient A for this refill, and the
disclosure note field in C&M's record for this
transaction remained blank. Id. ¶ 81.
to the Government, the State paid C&M $2, 054.39 for this
fraudulent claim. Id. ¶ 82. And in total,
between May 24, 2013 and October 19, 2014, the State paid
C&M $33, 867.16 for claims submitted for Patient A's
The CORE Center
Ronald Lubelchek of the Ruth M. Rothstein CORE Center served
as Patient A's physician. Id. ¶ 83. Cook
County Health and Hospital Systems operates the CORE Center,
which provides medical services for patients with HIV and
other infectious diseases. Id. Approximately 75
percent of CORE Center patients comprise Illinois Medicaid
recipients or participants in Medicaid Managed Care plans.
Id. The CORE Center operates a pharmacy on premises;
C&M serves as one of the outside pharmacies that provides
medications for the on-premises pharmacy. Id. ¶
to Dr. Lubelchek-who has worked with the CORE Center since
2005 and now serves as its acting medical director-C&M
sends electronic authorization requests through a
patient's electronic medical records after a patient
exhausts the series of refills for that specific medication.
Id. ¶¶ 85-86. C&M does not, however,
contact the CORE Center every month to obtain authorization
for each refill on a specific prescription. Id.
¶ 86. According to the Government, C&M nevertheless
sends refills to the CORE Center on a monthly basis, which
results in ...