U.S. Third Circuit - The FindLaw 3rd Circuit Court of Appeals Opinion Summaries Blog

Court Revives Nursing Home Kickback Case

A federal appeals court reinstated a lawsuit against a pharmaceutical company that allegedly got kickbacks from nursing homes to get more lucrative business.

In United States of America v. Omnicare, Inc., plaintiff Mar Silver blew the whistle on PharMerica Corporation in the alleged kickback scheme. He claimed the company defrauded the government by giving below-cost medications to Medicare patients in exchange for better-paying Medicaid patients.

It's called "swapping" in the business, if you haven't read about it. How the plaintiff knew about it was key to the appeals court decision.

False Claims Act

With the federal government leading, Silver sued but lost on summary judgment at the trial court. The judge said his False Claims Act lawsuit was barred by a prohibition on litigation based on public information.

The Third Circuit reversed, saying that the "public disclosure bar is not implicated in such a circumstance, where a relator's non-public information permits an inference of fraud that could not have been supported by the public disclosures alone."

The trial judge cited Silver's deposition testimony, when Silver said he learned of the fraud based on public documents. But, the appeals court said, the judge should have undertaken "an independent review to determine whether those documents sufficiently disclosed the fraud."

The FCA imposes civil liability on anyone who "knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval" by the government. In PharMerica's case, the company allegedly billed the federal government for services that it obtained through the kickbacks.

PharMerica Act II

If you didn't remember, it's not the first time PharMerica has been caught in an alleged kickback scheme. In 2015, the company agreed to settle a whistleblower lawsuit that involved an anemia treatment.

In that case, plaintiff Frank Kurnik filed a False Claims Act that said Amgen paid kickbacks to PharMerica and others. At the time, PharMerica was the second-largest pharmacy services company in the United States.

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