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

Background

This was a private-party lawsuit brought on behalf of the federal government under the False Claims Act (FCA), a law that allows a private person to pursue alleged fraud against the government. Uri Bassan, a pharmacist and former Pharmacist-in-Charge at an Omnicare pharmacy in Albuquerque, New Mexico, filed the original complaint in 2015. The United States later intervened, meaning it joined the case and took primary responsibility for the federal claims. The states named in Bassan’s complaint declined to intervene.

The government alleged that, from 2010 through 2018, Omnicare pharmacies dispensed prescription drugs to residents of assisted-living and other residential facilities without valid prescriptions. The alleged practices included refilling prescriptions after they expired or after authorized refills were exhausted, relying on medication records or lists that were not valid prescriptions, and using Omnicare’s OmniDX, cycle-fill, and Oasis systems to continue dispensing drugs. The government alleged that Omnicare then submitted reimbursement claims to Medicare, Medicaid, and TRICARE containing false or misleading information.

The government asserted five claims against Omnicare and CVS: three FCA claims, including conventional false-claim theories and a reverse false claim; and common-law claims for payment by mistake and unjust enrichment. The government alleged that CVS became involved after purchasing Omnicare in 2015 by overseeing Omnicare’s operations and compliance activities, learning of the dispensing problems, and failing to stop them. Bassan separately asserted state-law FCA claims under the laws of 29 states and the District of Columbia.

Motions and analysis

Omnicare moved to dismiss the government’s complaint and Bassan’s remaining state-law claims. CVS moved to dismiss the government’s claims on the same grounds and additionally argued that the government had not adequately alleged either a basis to disregard the corporate separation between CVS and Omnicare or CVS’s direct participation in the alleged scheme.

The court applied Federal Rule of Civil Procedure 12(b)(6), which asks whether a complaint states a legally sufficient claim, and Rule 9(b), which requires fraud allegations to describe the circumstances of the alleged fraud with particularity. The court held that the government’s allegations were sufficiently detailed. The complaint identified the alleged dispensing practices, the systems involved, facilities where the conduct allegedly occurred, more than 4,000 allegedly false Medicare claims, and facts supporting the allegation that the defendants knowingly submitted false claims.

The court rejected Omnicare’s argument that Medicare claims submitted before January 1, 2013 could not be false because a particular Medicare regulation took effect on that date. The court reasoned that other federal statutes and guidance had already indicated that prescription drugs could not be reimbursed without valid prescriptions. The court also held that the government adequately pleaded a reverse false claim based on the alleged failure to return overpayments after learning of the improper reimbursements. It allowed the government to plead that theory as an alternative to its other FCA theories at this stage.

The court further held that the government could pursue its federal common-law claims for payment by mistake and unjust enrichment alongside its FCA claims, while noting that there could be no double recovery. As to CVS, the court found that the allegations of CVS’s oversight, knowledge, audit activity, and failure to address the alleged conduct were sufficient to plead CVS’s direct participation. The court stated that the government did not need to rely on a veil-piercing or alter-ego theory to hold CVS responsible for its own alleged actions.

The court also addressed Bassan’s federal FCA claims. Because the government had intervened, its complaint became the operative pleading for the federal claims. However, the court declined to dismiss Bassan’s superseded federal claims, explaining that the FCA permits a relator to continue as a party subject to statutory limits. Bassan’s state-law claims were treated separately because the court wanted to avoid litigating numerous state-law issues before the federal claims were resolved.

Disposition

The court denied Omnicare’s motion to dismiss the government’s FCA and common-law claims. It denied CVS’s motion to dismiss the claims against CVS, including CVS’s additional arguments concerning direct participation and corporate separation. It denied Omnicare’s motion to dismiss Bassan’s superseded federal FCA claims. It also denied, without prejudice to renewal after the federal claims are resolved, Omnicare’s motion to dismiss Bassan’s state-law claims, and stayed those state-law claims pending resolution of the government’s FCA claims.

This order decided only whether the pleaded claims could proceed; it did not determine whether Omnicare or CVS ultimately violated the FCA or owed damages.