United States ex rel. Heller v. Guardian Pharmacy, LLC

521 F.Supp.3d 1254

UNITED STATES of America EX REL. Henry B. HELLER, Plaintiff,

v.GUARDIAN PHARMACY, LLC and Guardian Pharmacy of Atlanta, LLC, Defendants.

Civil Action No. 1:18-cv-03728-SDG

United States District Court, N.D. Georgia, Atlanta Division.

Signed February 10, 2021

Gabriel Adam Mendel, Office of the United States Attorney, Atlanta, GA, for Plaintiff United States of America ex rel.

Lynn M. Adam, Adam Law LLC, Decatur, GA, Caroline Gray McGlamry, Jay Forbes Hirsch, Michael J. Moore, Pope McGlamry, Elizabeth Studdard White, Pope McGlamry Kilpatrick Morrison & Norwood, P.C., Kimberly J. Johnson, Pope McGlamry, P.C., Atlanta, GA, Charles W. Byrd, Walker Hulbert Gray Byrd & Christy, Perry, GA, for Plaintiff Henry B. Heller.

Glenn Paul Hendrix, W. Jerad Rissler, Arnall Golden Gregory LLP, Atlanta, GA, for Defendants.

OPINION AND ORDER

Steven D. Grimberg, United States District Court Judge

This matter is before the Court on a motion to dismiss filed by Guardian Pharmacy, LLC (Guardian Pharmacy) [ECF 32]; a motion to dismiss filed by Guardian Pharmacy of Atlanta, LLC (Guardian Atlanta) [ECF 34]; and a joint motion for sanctions filed by both Defendants [ECF 50]. For the following reasons, and with the benefit of oral argument, Guardian Atlanta's motion to dismiss is DENIED ; Guardian Pharmacy's motion to dismiss is GRANTED ; and Defendants’ motion for sanctions is DENIED .

I. BACKGROUND¹

Guardian Pharmacy is an institutional, long-term care pharmacy headquartered in Atlanta, Georgia that fills orders for prescription medications exclusively for residents of assisted living communities (ALCs) and personal care homes (PCHs) (collectively, Communities).² Guardian Pharmacy owns pharmacies in 37 locations in 18 states.³ It operates through "Partner Pharmacies," entities for which Guardian Pharmacy is the majority owner and operates jointly with a local management team.⁴ One of these Partner Pharmacies is Guardian Atlanta.⁵

Guardian Pharmacy is the majority owner of Guardian Atlanta and, according to Heller, controls much of its overall operations and strategic direction.⁶ Guardian Atlanta provides pharmacy services to a swath of Communities throughout northern Georgia, including the metro-Atlanta area.⁷ Plaintiff-Relator Henry B. Heller is the former co-owner of Collier's Personal Care Pharmacy (Collier's), a long-term care pharmacy that operated in northern Georgia and that Guardian Atlanta acquired in 2017.⁸ After Collier's acquisition, Guardian Atlanta contracted with Heller as an account manager consultant beginning on January 23, 2017.⁹ Heller's employment with Guardian Atlanta ended on October 30, 2018.¹⁰

Defendants conduct business in an aggressively competitive field against other institutional and retail pharmacies (such as CVS and Walmart) to fill prescriptions for long-term care residents.¹¹ According to Heller, in order to gain access to a greater number of residents, Defendants negotiate agreements with the owners and operators of Communities which, in turn, bestow upon Defendants status as the "preferred pharmacy" for their residents.¹² Although the residents retain the ultimate freedom to choose any pharmacy to fill their prescriptions, a Community "steers" its residents to select that Community's preferred pharmacy.¹³ Residents overwhelmingly oblige; Heller notes that approximately 80% of residents in Communities under a preferred pharmacy contract with Defendants select them to fill their prescriptions.¹⁴

To obtain this lucrative preferred pharmacy status, Heller alleges Defendants offer Communities certain inducements to persuade them to select Defendants over their competitors.¹⁵ Specifically, Heller alleges Defendants offer and perform certain services for free, below market value, or below cost to the Communities that select them as their preferred pharmacy.¹⁶ The services comprising the alleged inducement scheme fall into three general categories: (1) free services for Electronic Medication Administration Records (eMAR) systems, which Communities use to maintain daily medication administration records for each resident (hereafter, eMAR services); (2) free or below fair market value medication management services, referred to by Heller as "consulting" or "audit" services (hereafter, medication management services); and (3) free or below cost education classes and skills checks to the Communities’ staff members.¹⁷

For the first category, Georgia law requires Communities to maintain certain records that track the daily administration of medications to each resident.¹⁸ Many Communities fulfill this obligation by using an eMAR system.¹⁹ Heller alleges Guardian Atlanta offers free eMAR services—namely purchasing user licenses from eMAR companies, supplying the hardware for the eMAR systems, installing and setting up the systems, and providing limited technical support—to the Communities as an inducement to choose Guardian Atlanta as their preferred pharmacy.²⁰ According to Heller, the setup fees generally charged by eMAR companies range from $499 to $7,000.²¹ Although Guardian Atlanta charges some residents of some facilities a $10 monthly fee for eMAR subscription services, Heller contends Guardian Atlanta does not charge any Communities.²²

For the second category, Heller alleges Guardian Atlanta provides certain medication management services to Communities for free or below fair market value.²³ According to Heller, Guardian Atlanta maintains a "Consulting Department"—comprised of two pharmacists and two pharmacy nurses—whose sole responsibilities are to conduct medication management services at the Communities.²⁴ For example, the Consulting Department: (1) reviews the medical administration record and stored medications for each resident that uses Guardian Atlanta; (2) audits medication records and medication storage cards; and (3) consults with each Community on drug management, record-keeping, storage, and prescription disposal.²⁵ Guardian Atlanta provides these services on-site for the Communities.²⁶ Heller alleges that, beginning in 2014, Guardian Atlanta stopped charging a discounted monthly fee for these services and began providing them for free or below fair market value.²⁷ The pharmacy consulting services take approximately 10 minutes per resident, per quarter, to perform and have a value of approximately $10 to $20 per resident.²⁸ Due to the number of hours expended on these services—which are provided for free or below fair market value—Lori Newcomb (a Guardian Atlanta consultant and manager of the Consulting Department) described the Consulting Department as a "black hole" for revenue purposes in a February 2018 email.²⁹

The final category of alleged inducements pointed to by Heller are education classes and skills checks provided by Guardian Atlanta to the Communities for free or below cost.³⁰ Like daily medication tracking, Georgia law requires Communities to provide these services to their staff members.³¹ Although Guardian Atlanta generally charged Communities $50 per day—or $100 total per person—for these services, Heller alleges Guardian exempted "the host facility, new Guardian customers, and newly licensed assisted living communities" from these charges.³² In January 2018, Guardian Atlanta changed this policy and announced it would begin charging all Communities for these education classes and skills checks.³³

According to Heller, Defendants’ actions violated the False Claims Act (FCA) and Anti-Kickback Statute (AKS) because each payment by a federal insurance provider for prescriptions filled for residents of Communities under a preferred pharmacy relationship with Defendants were "tainted" by the kickback scheme, rendering them false and ineligible for payment.³⁴ Heller, as the Relator, initiated this action on August 3, 2018.³⁵ On November 18, 2019, the United States filed its notice declining to intervene.³⁶ On December 10, the Court unsealed the initial Complaint.³⁷ Heller filed an Amended Complaint on March 6, 2020, asserting three claims for violation of the FCA.³⁸ Count I asserts a claim under 31 U.S.C. § 3729(a)(1)(A), colloquially known as a false presentment claim.³⁹ Count II alleges a violation of 31 U.S.C. § 3729(a)(1)(B), referred to as a false use claim.⁴⁰ Count III contends Defendants violated 31 U.S.C. § 3729(a)(1)(G), referred to as a "reverse" false claim.⁴¹

On May 5, Guardian Pharmacy and Guardian Atlanta filed separate motions to dismiss.⁴² On May 29, Heller filed responses in opposition to both dispositive motions.⁴³ Defendants filed separate replies on June 19.⁴⁴ Seven days later, Defendants filed a joint motion for sanctions against Heller and his legal counsel under Federal Rule of Civil Procedure 11.⁴⁵ Heller filed a response in opposition to the motion for sanctions on July 10.⁴⁶ Defendants filed a reply on July 24.⁴⁷ The Court heard oral arguments from the parties on all outstanding motions on August 12.

II. LEGAL STANDARD

"At the pleading stage, a complaint alleging violations of the FCA must satisfy two pleading requirements." United States ex rel. Matheny v. Medco Health Sols., Inc. , 671 F.3d 1217, 1222 (11th Cir. 2012). First, Federal Rule of Civil Procedure 8(a)(2) requires a pleading to contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). Rule 12(b)(6) provides for the dismissal of a complaint that fails to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citing Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). A claim is facially plausible if "the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for...