United States of America ex rel. Uri Bassan v. Omnicare, Inc.

Background

This False Claims Act case began in June 2015 when Uri Bassan brought an action on behalf of the federal government, 29 states, and the District of Columbia. In 2019, the United States intervened and filed its own complaint against Omnicare, Inc. and CVS Health Corp. CVS Health’s wholly owned subsidiary, CVS Pharmacy, Inc., acquired Omnicare on August 18, 2015.

The government alleges that from 2010 through 2018, Omnicare dispensed prescription drugs to people living in long-term residential facilities without valid prescriptions, then submitted reimbursement claims to federal health-care programs. The government alleges that those claims contained false information.

The motion

CVS Health moved for summary judgment under Rule 56. Summary judgment is a decision without a trial that is appropriate only when there is no genuine dispute about a fact that could affect the outcome and the moving party is entitled to judgment under the law.

CVS Health argued that it did not directly participate in the alleged false claims. It also argued that the government was improperly attempting to hold CVS Health responsible for the actions of CVS Pharmacy, its subsidiary. CVS Health relied on testimony that it was a holding company, did not draft Omnicare’s detailed dispensing policies or training, did not impose productivity expectations on Omnicare, and was not involved in Omnicare’s claims-submission process.

Corporate separateness

The court stated that separately incorporated corporations are generally treated as separate entities from their parent companies and sister subsidiaries. A party may sometimes seek to disregard that separation by proving grounds to “pierce the corporate veil,” but the government had chosen not to pursue veil-piercing or alter-ego theories.

The court ruled that the government could not hold CVS Health liable merely for CVS Pharmacy’s or another subsidiary’s conduct. The government had sued CVS Health and therefore had to prove that CVS Health itself participated in the alleged medication-dispensing and false-claims scheme. The court also said that it was too late in the litigation to add new parties.

Evidence of possible direct participation

The False Claims Act imposes liability on a person who knowingly presents, causes the presentation of, or helps cause the government to pay a false or fraudulent claim. The court explained that mere awareness that another entity made or might make a false claim is not enough. The relevant question was whether CVS Health’s own conduct caused the alleged false claims to be submitted.

The government offered evidence that CVS Health entered into a Corporate Integrity Agreement with the Department of Health and Human Services. The agreement required systems and procedures designed to ensure accurate dispensing and billing for drugs connected with Omnicare’s operations. It also required the Omnicare compliance officer to be an employee and member of senior management of CVS Health. The government additionally cited evidence that CVS Health compliance supervisors were at the top of Omnicare’s compliance chain of command, that CVS Health sometimes reviewed and rewrote subsidiary pharmacy policies, and that CVS Health knew of a decision to restore a facility-code arrangement that allowed rollover dispensing while a review was pending.

The court found that most of this evidence showed awareness of Omnicare’s compliance policies rather than specific steps to facilitate false claims. But the Corporate Integrity Agreement created a factual question because the record did not identify the compliance officer or establish whether that person was an employee of CVS Health itself rather than of a subsidiary. The court therefore could not conclude at the summary-judgment stage that CVS Health had not directly participated in the alleged fraud.

Disposition

Judge McMahon denied CVS Health’s motion for summary judgment. The court emphasized that the government still must prove at trial that CVS Health, as the holding company sued, participated in the alleged scheme. The court stated that it would closely examine the trial evidence and could grant a directed-verdict motion if the government failed to meet that burden.