New Pharmacy, Same Result: Seventh Circuit Holds That Objective Reasonableness Dooms “Usual and Customary” Pricing Case

On April 5, 2022, in a 2-1 decision, the Seventh Circuit applied the precedent it set in United States ex. rel. Schutte v. SuperValu Inc., 9 F.4th 455 (7th Cir. 2021) (discussed here) and found once again that a defendant retail pharmacy did not act with “reckless disregard” under the False Claims Act (“FCA”) by interpreting Medicare Part D and Medicaid “usual and customary” price requirements as allowing it to charge those programs its retail cash prices rather than prices offered through discount programs. United States ex rel. Proctor v. Safeway, Inc., No. 20-3425, 2022 WL 1012256 (7th Cir. Apr. 5, 2022). (more…)

Split Seventh Circuit Panel Spars Over Escobar Interpretation

The United States Court of Appeals for the Seventh Circuit recently allowed a previously dismissed qui tam case to proceed against Molina Healthcare of Illinois (“Molina”). The suit, brought by a relator who founded Molina subcontractor GenMed, alleges that Molina fraudulently billed Illinois’ Medicaid program for skilled nursing facility (“SNF”) services that were not actually provided.  The district court previously dismissed the case at the pleading stage in June 2020, finding that the relator’s complaint insufficiently alleged that Molina knew its alleged false claims were material. The Seventh Circuit, in a split decision, reversed and remanded the case for further proceedings. (more…)

Seventh Circuit Affirms That Safeco “Objective Reasonableness” Standard Applies to FCA Claims; Finds It Was Objectively Reasonable for Defendants to Charge Government Retail Cash Prices Instead of Discount Program Prices

In a 2-1 decision, the Seventh Circuit joined the Third, Eighth, Ninth, and D.C. Circuits in holding that the standard for “reckless disregard” under the Fair Credit Reporting Act (“FCRA”) established by the Supreme Court in Safeco Insurance Company of America v. Burr, 551 U.S. 47 (2007) applies equally to the False Claims Act (“FCA”). Applying Safeco, the Seventh Circuit also held that it was objectively reasonable for Defendants, a group of retail pharmacies, to charge the Medicare Part D and Medicaid programs their retail cash prices as their “usual and customary” prices for drugs rather than prices offered through competitor price-match discount programs.


DOJ Opposes Supreme Court Review of Granston Dismissal Standard

On May 21, 2021, the Department of Justice filed a brief in opposition to a petition for writ of certiorari filed by the relator in U.S. ex rel. Cimznhca, LLC v. UCB, Inc.  The petition challenges the Seventh Circuit’s decision reversing the district court’s denial of the government’s motion to dismiss over the relator’s objection.  In reversing, the Seventh Circuit determined that, so long as relators have an opportunity to be heard under 31 U.S.C. § 3730(c)(2)(A), the government may dismiss qui tams when it satisfies the standard contained in Federal Rule of Civil Procedure 41(a)(1)(A)(i).  That rule provides that a plaintiff may dismiss an action by serving notice of dismissal any time before the opposing party serves either an answer or a motion for summary judgment.


Seventh Circuit Remand on “Proximate Cause” Issue Results in Summary Judgment for Defendant on FCA Claim

Two years ago, the Seventh Circuit reversed itself by abandoning its “but-for” causation test in FCA cases in favor of a “proximate cause” rule that had been adopted by all other circuits that had addressed the issue.  See United States v. Luce, 873 F.3d 999 (7th. Cir. 2017) (overruling United States v. First National Bank of Cicero, 957 F.2d 1362 (7th Cir. 1992)).  The Seventh Circuit remanded the case to the district court with instructions to determine whether the government could establish that the defendant’s conduct proximately caused harm to the government.  In an opinion issued last week, the district court strictly applied the new standard and concluded the government could not show proximate cause.  United States v. Luce, 2019 U.S. Dist. LEXIS 114718 (N.D. Ill. July 10, 2019).


Seventh Circuit Holds That 2009 CMS Letter Triggered Public Disclosure Bar for Pre- and Post-Letter Conduct

On August 8, 2017, the Seventh Circuit affirmed the dismissal of an FCA suit alleging that a psychiatric hospital (“Hartgrove”) submitted claims to Medicaid despite maintaining a higher patient census than Hartgrove was licensed to maintain, providing some important clarification on the scope of the public disclosure bar. (more…)

Seventh Circuit Rejects False Claims Act and Retaliation Claims Premised on Purported Contractual Violations

In United States ex rel. Uhlig v. Fluor Corp., et al., No. 14-2815 (7th Cir. Oct. 11, 2016), the Seventh Circuit affirmed the grant of summary judgment in favor of Fluor Corporation (“Fluor”) in an FCA action premised on alleged contract violations and whistleblower retaliation.  The decision sets a relatively high bar for proving the existence of “protected” whistleblower activity and is particularly helpful for defendants seeking to defeat retaliation claims under the FCA.


Seventh Circuit Holds Allegations of Specific Claims Not Required to Satisfy Rule 9(b), but Sets High Bar For Pleading Claims Based on Allegations of Medically Unnecessary Services

In another recent False Claims Act (“FCA”) case decided on Rule 9(b) grounds, the Seventh Circuit rejected the contention that allegations regarding specific claims submitted are necessary to survive a motion to dismiss, but set a very high bar for pleading FCA claims premised on a lack of medical necessity.


Seventh Circuit Offers Guidance on Post-Escobar Pleading

In a recent case, affirming the dismissal of an FCA complaint against the City of Chicago, the Seventh Circuit provided guidance to those seeking to understand the pleading requirements for an implied certification claim after the Supreme Court’s recent decision in Escobar.  In United States ex rel. Hanna v. City of Chicago, No. 15-3305 (7th Cir. Aug. 22, 2016), the Court held that the relator failed to provide sufficient detail on the alleged statutory and regulatory violations and the link between those violations and the alleged false certification to meet the heightened Rule 9(b) standard.


In Post-Escobar Decision, Seventh Circuit Suggests Tough Hurdle for Establishing Knowledge Where Underlying Statutory Obligations Are Ambiguous

In its first post-Escobar FCA opinion, the Seventh Circuit affirmed summary judgment in favor of defendants in United States ex rel. Sheet Metal Workers Int’l Assoc. v. Horning Investments, LLC, No. 15-1004 (7th Cir. July 7, 2016), and in doing so suggested that there is a high bar for establishing that defendants acted with the requisite knowledge when the claim is that they falsely certified compliance with an ambiguous underlying law.