United States of America ex rel. NPT Associates v. Laboratory Corporation of…

Background

NPT Associates brought a qui tam action under the federal False Claims Act on behalf of the United States and the listed states and the District of Columbia. NPT also asserted claims under state-law counterparts to the False Claims Act. NPT alleged that Laboratory Corporation of America Holdings (LabCorp) violated those laws by offering private insurance programs deeply discounted laboratory-testing rates in exchange for preferred-provider or exclusive-provider arrangements, while those programs allegedly pressured doctors to refer patients covered by Medicare and Medicaid to LabCorp. NPT further alleged that LabCorp then charged the government programs substantially more than it charged private insurers.

LabCorp moved to dismiss all claims under Federal Rules of Civil Procedure 9(b) and 12(b)(6). Rule 9(b) requires fraud allegations to identify the circumstances of the alleged fraud with particularity. Rule 12(b)(6) permits dismissal when a complaint does not allege enough facts to state a plausible claim. The United States government had declined to intervene.

Court’s analysis

The court held that the Fourth Amended Complaint did not plead the alleged kickback scheme with the particularity required by Rule 9(b). Although NPT identified doctors and participants in meetings between LabCorp and UnitedHealth Group Incorporated, the court found that the allegations did not provide enough detail about how doctors were pressured or what was said to them. The alleged facts could also support legitimate business activity, such as an agreement exchanging exclusivity for discounted prices, rather than an unlawful referral arrangement.

The court separately held that NPT failed to identify specific false claims. NPT alleged prices for two tests, identified eleven doctors, and alleged that LabCorp could search its records for related claims. But the court found that NPT had not shown that the missing claim details were uniquely within LabCorp’s knowledge, and NPT did not provide representative examples of fraudulent claims.

The court also rejected NPT’s theory based on the federal restriction concerning charges substantially above an entity’s usual charges. A higher price for government programs than for a private insurer receiving discounted rates did not, by itself, establish that the government-program prices exceeded LabCorp’s usual prices. NPT offered no supporting details for its assertion that the discounted rates had become LabCorp’s usual prices. The court further stated that NPT had not explained why any violation of that pricing restriction would have been material to the government’s payment decision, as required for a False Claims Act claim based on such a misrepresentation.

Disposition

The court dismissed the federal False Claims Act claims. Because it dismissed all claims over which it had original federal jurisdiction, it declined to exercise supplemental jurisdiction over the state-law claims under 28 U.S.C. § 1367(c)(3). The court granted LabCorp’s motion to dismiss, directed the Clerk to terminate the motion, and ordered the case closed.