United States ex rel. Musachia v. Pernix Therapeutics, LLC

UNITED STATES OF AMERICA, ex rel. JACK MUSACHIA, Plaintiff, v. PERNIX THERAPEUTICS, LLC, et al. Defendants.

Case No.: 2:18-cv-01445-RDP

UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

July 7, 2021

MEMORANDUM OPINION

This matter is before the court on Defendants' Motion to Dismiss (Doc. # 60) Plaintiff's Second Amended Complaint (Doc. # 57). The Motion is fully briefed. (Docs. # 60, 63, 66). After careful consideration, and for the reasons stated below, Defendants' Motion to Dismiss (Doc. # 60) is due to be granted.

I. Background

Plaintiff Jack Musachia asserts two claims against Quickcare Pharmacy, Inc. ("Quick Care¹") and Supersaver Pharmacy, Inc. ("Supersaver") (collectively, "Defendants"). Each allege a violation of the False Claims Act ("FCA"). The FCA provision at issue in Count One is 31 U.S.C. § 3729(a)(1)(A), which creates a cause of action against "any person who ... knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval" to the United States. The provision at issue in Count Two is 31 U.S.C. § 3729(a)(1)(B), which creates a separate causeof action against "any person who ... knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim" submitted to the United States.

A. Legal Background

There are various ways that a submitted claim may be "false or fraudulent" under the FCA. One is if a claim violates the Anti-Kickback Statute ("AKS"). 42 U.S.C. § 1320a-7b(g). An AKS violation is per se "false or fraudulent" under the FCA. Id. Indeed, the AKS "broadly forbids kickbacks, bribes, and rebates in the administration of [G]overnment healthcare programs," and the statute is violated if the kickbacks "induce the referral of an individual for services paid under a federal health care program." Carrel v. AIDS Healthcare Found., Inc., 898 F.3d 1267, 1272 (11th Cir. 2018) (citing § 7b(b)); United States ex rel. Silva v. VICI Mktg., LLC, 361 F. Supp. 3d 1245, 1253 (M.D. Fla. 2019) (internal quotation marks omitted) (quoting United States v. Choudhry, 262 F. Supp. 3d 1299, 1306 (M.D. Fla. 2017) (internal citation omitted)). Importantly, the FCA "does not create liability merely for a health care provider's disregard of Government regulations or improper internal policies unless, as a result of such acts, the provider knowingly asks the [g]overnment to pay amounts it does not owe." United States ex rel. Clausen v. Lab'y Corp. of Am., 290 F.3d 1301, 1311 (11th Cir. 2002) (internal citations omitted). In other words, a violation of the AKS without accompanying submission of claims to the Government is not a violation of the FCA. Instead, [i]t is the submission and payment of a false ... claim ... that creates FCA liability." United States ex rel. Mastej v. Health Management Associates, Inc., 591 F. App'x 693, 706 (11th Cir. 2014) (emphasis in original).

B. Factual and Procedural Background²

Plaintiff filed this qui tam action³ against Defendants. (Doc. # 57 at ¶¶ 1-11). Following the court's Memorandum Opinion and Order (Doc. # 54), Plaintiff filed his SAC. (Doc. # 57). Defendants thereafter filed their second Motion to Dismiss Plaintiff's Second Amended Complaint.⁴

Plaintiff is a former sales representative at Pernix Therapeutics, LLC,⁵ a pharmaceutical company that manufactured the opioid ZoHydro. (Id. ¶¶ 1, 5-9). As a sales representative, Plaintiff "actively advertised and marketed" a joint marketing and sales program ("Joint Program") entered into by Pernix and Defendants. (Id. ¶¶ 6-14). Neither of the Defendants employed Plaintiff. Rather, Plaintiff worked inside doctor's offices and was "instructed to leave printed advertising materials and discuss with office staff (including physicians) a prescription direct fulfillment program." (Docs. # 57 ¶¶ 12-14; 57-1; 66 at 3-4). Plaintiff distributed fliers to physicians and health care providers at the direction of Pernix and "on behalf of" Defendants. (Doc. # 57 ¶¶ 6, 7, 12). The Joint Program is described in a flier Plaintiff submitted as an exhibit to the Second Amended Complaint. (Doc. # 57-1).

Defendants are pharmacies that distribute and fill ZoHydro prescriptions. (Doc. # 57 ¶¶ 6, 8-9). In filling prescriptions, Defendants engaged in the Joint Program, which began with a physician's decision to prescribe Zohydro to a patient. (Doc. # 57-1).

After the physician wrote the prescription, Defendants used two mechanisms in the Joint Program to "increase [the number of filled ZoHydro] prescriptions." (Doc. # 57 ¶¶ 6, 20, 34). The first involved free shipping of ZoHydro to patients. (Id. ¶¶ 1, 14, 18, 28, 32, 40). "Quick Care ... addressed users demand through free shipping to federal beneficiaries." (Id. ¶ 18). The free overnight shipping "sav[ed] customers from having to visit the local pharmacist." (Id. ¶¶ 6, 8-9, 17).

The second part of the Joint Program involved the waiver of copayments for ZoHydro. (Docs. # 20-1; 57 ¶¶ 15-16, 19-20, 22, 26, 32, 34). Notably, the flier disseminated by Plaintiff states that the Joint Program "is not valid if your prescription is paid/partially paid by Medicaid, Medicare, Federal or State healthcare programs." (Id.). However, according to Plaintiff "[d]espite the ... disclaimer barring waiver for federal[ly] [insured patients], [Defendants] dispensed ZoHydro ER" and waived copayments for these patients. (Id. ¶ 19). And, after using the copayment waiver mechanism to induce patients to order ZoHydro prescriptions, Plaintiff alleges that Defendants submitted claims for federally insured patients to the Government.⁶ (Id. ¶¶ 23, 26, 35, 37). Defendants were aware they "could not give away ZoHydro without collecting a co-pay if federal monies were involved." (Id. ¶ 26). Plaintiff claims he has "direct and independent knowledge" of the program's details, and he asserts that his complaint is not based upon public information. (Id. ¶ 7).

II. Standard of Review

The Federal Rules of Civil Procedure require a complaint provide "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The complaint must include enough facts "to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Pleadings that include nothing more than "a formulaic recitation of the elements of a cause of action" do not meet Rule 8 standards, nor will "labels and conclusions" or "naked assertion[s]" without supporting factual allegations. Id. at 555, 557. In deciding a Rule 12(b)(6) motion, the court views a complaint's allegations in the light most favorable to the non-movant. Watts v. Fla. Int'l Univ., 495 F.3d 1289, 1295 (11th Cir. 2007).

To survive a motion to dismiss under Fed. R. Civ. P. 12(b)(b), a complaint must "state a claim to relief that is plausible on its face." Twombly, 550 U.S. at 570. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678. Although "[t]he plausibility standard is not akin to a 'probability requirement,'" a complaint must demonstrate "more than a sheer possibility that a defendant has acted unlawfully." Id. (quoting Twombly, 550 U.S. at 557). A plausible claim for relief requires "enough fact[s] to raise a reasonable expectation that discovery will reveal evidence" to support the claim. Twombly, 550 U.S. at 556.

In considering a motion to dismiss, a court should "1) eliminate any allegations in the complaint that are merely legal conclusions; and 2) where there are well-pleaded factual allegations, 'assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.'" Kivisto v. Miller, Canfield, Paddock & Stone, PLC, 413 F. App'x 136, 138 (11th Cir. 2011) (unpublished) (quoting Am. Dental Assn. v. Cigna Corp., 605 F.3d 1283, 1290(11th Cir. 2010)). The task is context specific and, to survive the motion, allegations must permit the court, based on its "judicial experience and common sense ... to infer more than the mere possibility of misconduct." Iqbal, 556 U.S. at 679. If the court determines that well-pleaded facts, accepted as true, do not state a plausible claim, then dismissal is appropriate. Twombly, 550 U.S. at 570.

Plaintiff has asserted claims under the FCA, which are subject to the heightened pleading standard required under Rule 9(b). See Clausen, 290 F.3d at 1308; Cooper v. Blue Cross & Blue Shield of Fla., Inc., 19 F.3d 562, 568 (11th Cir. 1994). Thus, Plaintiff must "state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). The heightened particularity requirement "serves an important purpose in fraud actions by alerting defendants to the precise misconduct with which they are charged." Clausen, 290 F.3d at 1310 (citing Ziemba v. Cascade Int'l, Inc., 256 F.3d 1194, 1202 (11th Cir. 2001)).

In applying the particularity requirement to FCA violations premised on AKS violations, "a plaintiff must plead facts as to time, place, and substance of the defendants alleged fraud, specifically the details of the defendants allegedly fraudulent acts, when they occurred, and who engaged in them." Id. at 1310-11 (citing Cooper, 19 F.3d at 567-68) (internal quotations omitted); see Corsello v. Lincare, Inc., 428 F.3d 1008, 1013 (11th Cir. 2005) (applying the heightened pleading standard to FCA claims established by AKS violations); see also United States ex rel. Nunnally v. West Calcasieu Cameron Hosp., 519 F. App'x 890, 894 (5th Cir. 2013) ("[E]lements of the AKS violation must also be pleaded with particularity under Rule 9(b)[] because they are brought as a FCA claim."). This is especially important in qui tam actions where relators may be incentivized to file cases quickly (and without particularity) because the "first-to-file bar" precludes any subsequent action ...