Health Law Daily Wrap Up, FALSE CLAIMS ACT—C.D. Ill.: Intent issue remains in suit alleging prescription drug price-match program violated FCA, (Oct 2, 2024)

By Patricia K. Ruiz, J.D.

The price-match program was advertised widely to consumers, but the pharmacies did not submit the lower matched price cash sales to third-party payors, including government programs.

The U.S. District Court for the Central District of Illinois granted a motion for summary judgment in favor of the relators as to materiality and denied summary judgment as to scienter in a qui tam lawsuit alleging SuperValu, Inc. violated the False Claims Act (FCA) through its pharmacies’ prescription drug price match program. The court found that a misstatement regarding the collection of more money than actually owed was sufficient to establish materiality but that genuine issues of material fact existed as to whether the pharmacies acted in reckless disregard of the truth or falsity of the claims submitted (U.S. v. Supervalu, Inc., No. 11-CV-3290 (C.D. Ill. Sept. 30, 2024)).

Price match. The SuperValu pharmacies offered a price match guarantee under which pharmacy personnel replaced the pharmacies’ then-current, reported cash retail price with a lower competitor price. The pharmacies advertised the practice of matching competitor prices on prescription drugs, and its advertisements were disseminated to the public through various means, including in-store and pharmacy signage, fliers, circulars, in-store audio announcements, mailers, newspapers of general circulation, on the back of store receipts, and the pharmacies’ websites.

The relators alleged the price match program was a stealthy discount program and a direct response to Wal-Mart’s discount prescription drug program. The relators also argued the price match program was available to anyone who requested that the pharmacies match a competitor’s price. The relators argued that certain other requirements had to be met before receiving a competitor’s lower price, including the verification of the lower price by pharmacy staff. The pharmacies did not submit lower matched price cash sales transactions to third-party payors, including government health care providers. The pharmacies did not allow lower matched prices to be submitted to third party insurance, even if a customer specifically asked them to process a price match transaction through the customer’s insurance. The pharmacies claimed doing so would have violated their contracts with the payors.

Previous decisions. Previously, the court granted partial summary judgment in the relators’ favor, determining that the discount cash prices offered through the pharmacies’ price match program, which was available to all cash customers, are the usual and customary prices. The court further held Medicare Part D and Medicaid were entitled to those usual and customary prices. In a separate decision, the court granted summary judgment for the pharmacies based on the scienter element of the FCA, holding they could not have acted knowingly, as their actions in reporting their matched prices were objectively reasonable. On appeal, the U.S. Supreme Court found that the appropriate standard under the FCA is subjective—what did the pharmacies know as it related to the claims submitted to various government entities. In the instant opinion, the court limited its analysis to scienter and materiality.

Scienter. The relators argued the pharmacies were aware that they were required to report lower cash prices offered to the general public as the usual and customary price and attempted to hide the price matching program from audits and government entities, pointing to various emails and memoranda from various pharmacy benefit managers in support of the contention that the pharmacies knew that any discount pricing should be reported as a usual and customary price. Based on the facts at issue, the court found an issue of material fact remains as to whether the pharmacies’ knowledge of whether their reported prices were not their usual and customary prices when they reported those prices to various third parties. The pharmacies’ conduct and the information presented to them by payors, government entities, and pharmacy benefit managers raises a genuine question as to whether the pharmacies acted in reckless disregard of the truth or falsity of the claims submitted. Thus, the court denied summary judgment as to scienter.

Materiality. The FCA requires proof of materiality, or whether the alleged misrepresentations had the natural tendency to influence the payment or receipt of federal funds. Although some payors may have known about the pharmacies’ price matching, the court found no evidence that they knew claims submitted were false, in that the usual and customary price was inflated, and continued to pay the defendants. The court cited precedent finding that a misstatement regarding the collection of more money than actually owed was sufficient to establish materiality and found that the actions of the pharmacies in the instant case are incredibly similar. Thus, the court found the pharmacies’ submission of false claims are capable of influencing the payment or receipt of money and granted the relators’ motion for summary judgment as to materiality.

The case is No. 11-CV-3290.

Judge: Myerscough, S.

Attorneys: John David Hoelzer, U.S. Department of Justice, for the U.S. John Timothy Keller (Aschemann Keller LLC) for Tracy Schutte and Michael Yarberry. Craig Singer (Williams & Connolly LLP) for SuperValu Inc., Acme Sav-On Pharmacy, Albertsons Osco Pharmacy and Albertsons Sav-On Pharmacy.

Companies: SuperValu Inc.; Acme Sav-On Pharmacy; Albertsons Osco Pharmacy; Albertsons Sav-On Pharmacy

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