UNITED STATES OF AMERICA, ex rel. Jeffrey Webb, Plaintiff,
MILLER FAMILY ENTERPRISE, et als., Defendants.
Plaintiff JEFFREY WEBB represented by ARTHUR J. GREIF ex rel USA GILBERT & GREIF, P.A., JULIE D. FARR GILBERT & GREIF, P.A. ATTORNEY TO BE NOTICED
Defendant MILLER FAMILY represented by ADRIA YVONNE LAROSE ENTERPRISEEATON PEABODY ATTORNEY TO BE NOTICED, BERNARD J. KUBETZ EATON PEABODY ATTORNEY TO BE NOTICED
Defendant M DRUG LLC represented by STEPHEN G. SOZIO LEAD ATTORNEY ATTORNEY TO BE NOTICED ADRIA YVONNE LAROSE ATTORNEY TO BE NOTICED, BERNARD J. KUBETZ ATTORNEY TO BE NOTICED, EDWARD W. GOULD GROSS, MINSKY & MOGUL, P.A. ATTORNEY TO BE NOTICED
Interested Party EX REL USA represented by MICHELLE GIARD DRAEGER LEAD ATTORNEY ATTORNEY TO BE NOTICED, ANDREW K. LIZOTTE ATTORNEY TO BE NOTICED
RECOMMENDED DECISION ON MOTION FOR LEAVE TO FURTHER AMEND COMPLAINT (ECF NO. 52)
John C. Nivison U.S. Magistrate Judge
Plaintiff/Relator Jeffrey Webb requests leave to amend his Amended Complaint to satisfy the requirement that he set forth the factual basis for Defendants’ liability under the False Claims Act (31 U.S.C. § 3729 et seq.) with specificity in accordance with Rule 9(b) of the Federal Rules of Civil Procedure. Petitioner requests the amendment following a Recommended Decision that concludes, inter alia, that the current Amended Complaint fails to state a “direct false claim” with the required specificity. In the requested amendment, Plaintiff seeks to address the specificity issue through the addition of one paragraph that, in his view, “should alleviate any concerns about whether the government was in fact billed a second time for the returned drugs, as it is a matter of statistical certainty.” (Motion for Leave to Further Amend at 2, ECF No. 52.) Following a review of the pleadings, and after consideration of the parties’ arguments, as explained below, the recommendation is that the Court deny the motion.
The Proposed Amendment
Plaintiff seeks to supplement the Amended Complaint with the following paragraph:
28A. Plaintiff, in his role as the LTC Operations Manager for Defendants’ LTC division, was intimately familiar with the volume of prescription drugs sold to patients of the Facilities, as well as the payors for those prescription drugs. Seventy percent of the prescription drugs sold by Defendants’ LTC division were paid for with either MaineCare or Medicare Part D funds. All tablet or capsular drugs dispensed by Defendants’ LTC division to Facilities’ patients were sealed in blister pack. Any returned drugs remained in blister pack upon their return, and 90% of those returned drugs were removed by Defendants from the blister pack and returned to pill bottles that were, in size, one quart or less. It was impractical, for space reasons, to return these drugs to pill bottles while still in the blister pack, as the blister pack took up too much room in individual bottles. All returned drugs that were returned to pill bottles were ultimately resold. The only returned drugs which were not returned to pill bottles were narcotic drugs, which represented only 10% of the gross dollar volume of drug sales. As a matter of simple mathematics, 63% (90% of 70%) of all returned drugs would have been resold and rebilled to either MaineCare or Medicare Part D payors. It would be physically impossible to identify any specific returned drug initially paid for by MaineCare that was rebilled to MaineCare. However, as a matter of statistical certainty, the reselling of 90% of all returned drugs and the rebilling of 70% of those drugs to MaineCare or Medicare Part D payors, given the volume of drugs involved, necessarily involved a double billing to MaineCare or Medicare Part D insurers for drugs these payors had already paid for. Plaintiff has also reviewed the wholesaler invoices and revenue reports he retains from Defendants’ LTC division. He was the sole Purchaser for that division between 2005 and 2012 and was chiefly responsible for setting up the Cardinal Inventory Manager (“CIM”) system in 2006. He maintained the CIM system until 2012. Based upon his review of those documents, there were significantly more sales than purchases for Defendants’ LTC division and the value of excess inventory rose over this same time period. A pharmacy cannot have sales continually exceed purchases and still have inventory increase unless entities are being billed twice for the same drug.
Courts should grant leave to amend “freely” when “justice so requires.” Fed.R.Civ.P. 15(a). Leave to amend is properly denied for “undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.” Foman v. Davis, 371 U.S. 178, 182 (1962).
Here, the issue is whether in the context of a qui tam action, the proposed amendment satisfies the specificity requirement of Rule 9(b). United States ex rel. Gagne v. City of Worcester, 565 F.3d 40, 45 (1st Cir. 2009); United States ex rel. Karvelas v. Melrose–Wakefield Hosp., 360 F.3d 220, 228 (1st Cir. 2004). In other words, the issue is whether the amendment would be futile. Satisfying Rule 9(b) requires that “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b). In an action asserted under the False Claims Act, “if Rule 9(b) is to be adhered to, some indicia of reliability must be given in the complaint to support the allegation of an actual false claim for payment being made to the Government.” United States ex rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301, 1311 (11th Cir. 2002), cert. denied, 537 U.S. 1105 (2003) (emphasis in original) (cited with approval in Karvelas, 360 F.3d at 234-35). That is, “[e]vidence of an actual false claim is ‘the sine qua non of a False Claims Act violation.’” Karvelas, 360 F.3d at 225 (quoting Clausen, 290 F.3d at 1311).
Ordinarily, in a qui tam action under the False Claims Act, a plaintiff must assert details such as the time, place, and content of false claims. United States ex rel. Rost v. Pfizer, Inc., 507 F.3d 720, 731 (1st Cir. 2007). General allegations regarding plans and schemes do not suffice. Id. Instead, a party must set forth “details that identify particular false claims for payment that were actually submitted to the government.” Id. at 732. See also Karvelas, 360 F.3d at 231 (“[A] qui tam relator may not present general allegations in lieu of the details of actual false claims in the hope that such details will emerge through subsequent discovery.”). As explained by the First Circuit in Karvelas, the details of actual false claims include “the dates of the claims, the content of the forms or bills submitted, their identification numbers, the amount of money charged to the government, the particular goods or services for which the government was billed, [and] the individuals involved in the billing . . . .” 360 F.3d at 233.
Although Plaintiff has not asserted the specific time, place and content of the false claims, Plaintiff contends that the proposed amendment satisfies the specificity requirement because it demonstrates to a statistical certainty that Defendants submitted a second claim for drugs for which the government had previously paid. In particular, Plaintiff asserts that the amendment “should alleviate any concerns ...