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From Health Law Daily, December 5, 2014

Ukrainian pharmacy caviar kickback claims sink under limited factual support

By Bryant Storm, J.D.

The Seventh Circuit upheld the decision of a district court to dismiss with prejudice the qui tam action of a former pharmacist who alleged his former employer, a pharmacy, engaged in kickback and other fraud schemes in violation of the False Claims Act (FCA) (31 U.S.C. § 3729). The appellate court reasoned that the pharmacist’s fraud claims were not plead with sufficient factual specificity to survive a motion to dismiss. The only claims the Seventh Circuit allowed to proceed were the pharmacist’s retaliation claims, which the court remanded the case back to the district court to resolve (U.S. ex rel. Grenadyor v. Ukrainian Village Pharmacy, Inc., December 3, 2014, Posner, R.).

Scheme. Yury Grenadyor was formerly employed by the Ukranian VIlliage Pharmacy, Inc. as a pharmacist. Allegedly, during his time in that capacity, Grenadyor discovered fraudulent practices that the pharmacy carried out to defraud the government. Specifically, Grenadyor alleged that the pharmacy would make gifts to customers and forgive copays in order to induce customers to use the Ukrainian Village Pharmacy over its competitors. The gifts allegedly included tins of caviar and other gifts that the Seventh Circuit characterized as “goodies.” Grenadyor additionally alleged that the pharmacy sought reimbursement from the government for drugs that were never delivered to buyers. Grenadyor brought a qui tam action under the FCA to address the fraud on the government’s behalf and the U.S. declined to intervene. After several failed attempts to draft a complaint that satisfied federal fraud pleading standards, the district court dismissed Grenadyor’s case with prejudice (see, Strike three called in pharmacist attempt to plead qui tam action, November 8, 2013). Grenadyor appealed to the Seventh Circuit.

Fraud. The Seventh Circuit agreed with the district court and reasoned that Grenadyor had failed to provide necessary facts regarding the details of the fraud. Specifically, the Seventh Circuit held that although Grenadyor raised a question as to the existence of a fraudulent scheme, he failed to allege any particular instances in which a false claim was submitted on behalf of a patient or a Medicare beneficiary. Regarding the alleged kickback scheme, the court reasoned that Grenadyor failed to demonstrate that any of the “goodies” or kickbacks that were given to customers had value greater than $50, the threshold for a permissible inducement under the FCA regulations.

Undelivered. The court also determined that Grenadyor failed to explain how he learned that Medicare and Medicaid were billed for drugs that were never delivered to beneficiaries. Similarly, the court reasoned that the complaint lacked facts demonstrating particular instances where a claim for reimbursement was entered for a prescription and then not reversed when a patient did not come to claim it.  The Seventh Circuit characterized the factual reasoning of “I know they were never reversed, but I don’t know how I know they were never reversed,” as nonsensical. Additionally, the court concluded that the complaint’s general reliance on “information and belief” was insufficient to support a fraud claim.

Retaliation. The only aspect of the compliant that the Seventh Circuit deemed sufficient to survive the district court’s dismissal was Grenadyor’s retaliation claim. The court reasoned that it was possible that Grenadyor was terminated because of his legitimate attempt to raise concerns about the fraud with superiors. Accordingly, the court remanded the retaliation issue back to the district court for further evaluation.

The case number is 13-3383.

Attorneys: Timothy Cornell (Gardner Cornell, PC) for Yury Grenadyor. Yevgeny Meltser (Birg & Meltser) for Ukrainian Village Pharmacy, Inc. Mason N. Floyd (Martin, Brown, Sullivan, Roadman & Hartnett) for MEI Services, Inc. Nazar Kashuba (Demchenko Kashuba LLC) for Global Pharmalife, LLC. Thomas K. McQueen (Dentons U.S. LLP) for Storchak Pharmacy, LLC.

Companies: Ukrainian Village Pharmacy, Inc.; MEI Services, Inc.; Global Pharmalife, LLC; Storchak Pharmacy, LLC

MainStory: TopStory CaseDecisions AntikickbackNews FCANews BillingNews MedicaidPaymentNews PaymentNews PrescriptionDrugNews QuiTamNews IllinoisNews IndianaNews WisconsinNews

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