Health Law Daily Wrap Up, FRAUD AND ABUSE—D. Nev.: AKS claims can proceed against compounding pharmacy accused of kickbacks, (Jan 20, 2026)

By Justin Marcus Smith, J.D.

A recent Ninth Circuit decision did not foreclose the government’s case because the government alleged incentives to increase both the value and volume of prescriptions, regardless of patient need.

The federal government sufficiently pleaded violations of the Anti-Kickback Statute (AKS), 42 U.S.C. § 1320a-7b(b), in connection with an allegedly unlawful referral scheme for compounded prescriptions, held the federal district court in Las Vegas, Nevada. The complaint contained sufficient factual matter about unnecessary medications, accepted as true, to state a facially plausible and particularized claim. The complaint contained enough details of false claims, paired with reliable indicia, to draw an inference that false claims were actually submitted and to provide sufficient notice to defend. Among other details, the pharmacy and its owners allegedly had scienter to the extent they did not collect TRICARE and CHAMPVA copays. The complaint also pleaded a quid pro quo arrangement providing the necessary link element under the AKS. Congruent with a recent Ninth Circuit decision, the government alleged incentives to increase both the value and volume of prescriptions, regardless of patient need. Apart from dismissal of the unjust enrichment claim, where the AKS provides an adequate remedy at law, the court denied the responding pharmacy parties’ motion to dismiss (United States of America v. PCPLV LLC, No. 2:21-cv-00184-GMN-DJA (D. Nev. Jan. 13, 2026)).

Background. The federal government complained of alleged kickback schemes between marketers, physicians, and a compounding pharmacy. The government said the pharmacy paid substantial kickbacks to various third-party marketers in exchange for compounded drug prescription referrals. The pharmacy billed patient insurers including TRICARE and CHAMPVA (Civilian Health and Medical Program of the Department of Veterans Affairs). Alleged violations of the Anti-Kickback Statute (AKS), 42 U.S.C. § 1320a-7b(b), often paid in cash, formed the basis for the government’s claim under the False Claims Act (FCA), 31 U.S.C. § 3729, et seq. The pharmacy also allegedly entered into kickback arrangements with physicians directly. The physicians allegedly issued prescriptions for compounded medications for TRICARE and CHAMPVA beneficiaries without ever establishing a physician-patient relationship and usually without the required co-pays. The government claimed: (1) violation of the FCA based on violations of the AKS; (2) payment by mistake; and (3) unjust enrichment.

The pharmacy parties, marketers, and physicians (collectively, the pharmacy parties) moved to dismiss all claims for failure to state a claim per Fed. R. Civ. P. 12(b)(6). They argued: (1) the complaint did not satisfy R. 9(b) particularity; (2) the complaint did not plead the elements of an FCA claim under R. 9(b) and R. 12(b)(6); (3) the complaint did not sufficiently plead state law claims under R. 9(b) and R. 12(b)(6).

Particularized pleading. After analyzing each of the pharmacy parties’ six arguments for dismissal under R. 9(b), the court held the complaint pleaded fraud with the required particularity.

First, although one paragraph of the complaint was based on “information and belief,” the next two paragraphs provided a factual basis in the form of two tables purporting to show specific alleged kickback payments.

Second, the FCA claim alleged the disputed prescriptions were unnecessary. The complaint described in some detail the filling of prescriptions for three patients. The practices described supported an inference the prescriptions were unnecessary because the patients allegedly neither requested the prescriptions nor understood why they were prescribed. Although there is no categorical Medicare requirement that physicians see a patient in-person for a prescription to be reimbursable, the complaint alleged the physicians in question did not even speak with the people in question. The complaint alleged the absence of a physician-patient relationship. The complaint contained sufficient factual matter about the unnecessary medications, accepted as true, to state a facially plausible and particularized claim.

Third, the court disagreed with the pharmacy parties that the limited examples of alleged fraud lacked required particularity. The court reviewed how the Ninth Circuit has held that complaints do not necessarily have to identify every detail of a specific claim, but they must contain enough details of false claims paired with reliable indicia to draw an inference that false claims were actually submitted. Notice of the alleged fraudulent conduct necessary to defend was enough. The complaint in this case described the alleged kickback scheme, and the government pointed to an example about a “consulting fee agreement” confined to compounded prescriptions, an example the court found illustrative and meeting the particularity standard.

Fourth, the government did allege sufficiently particular details of a per se false claim scheme in violation of the AKS, albeit without identifying any specific false claims, paired with reliable indicia in the form of tables, which could support a strong inference that false claims were actually submitted. The government met Ninth Circuit R. 9(b) pleading obligations for FCA claims.

Fifth, as to whether the complaint impermissibly lumped the defendants together for individual liability, the court found the complaint pleaded with particularity the role and action of each named respondent. The complaint provided sufficient differentiation for notice to each.

Sixth, the court addressed similar arguments about a specific responding entity and concluded the government’s complaint was not ambiguous based on similar reasoning it already discussed.

FCA elements. The pharmacy parties argued the complaint did not sufficiently plead the elements of an FCA claim predicated on AKS violations, but the court found all elements satisfied.

First, the FCA requires scienter, a knowing and willful act, but a person need not have actual knowledge of the AKS itself. The pharmacy parties argued the complaint lacked requisite scienter, but the court found the complaint provided “many examples” of scienter satisfying the AKS and FCA. The complaint pleaded the physicians prescribed compounded prescriptions without a physician-patient relationship, even to patients who said they did not want a certain prescription. The pharmacy and its owners allegedly had scienter to the extent they did not collect TRICARE and CHAMPVA copays, received inquiries asking why patients received medications they did not request, and did not discard returned medications. The court described examples of putative actual knowledge at length. Each, if proved, would satisfy AKS scienter.

As for the required element of a connection between the alleged kickback scheme and false claims, the AKS generally does not require proof of a quid pro quo. The court said Ninth Circuit courts have declined to adopt the Sixth and Eighth Circuits’ “but-for” causation standard the pharmacy parties urged. A third circuit case the pharmacy relied on described the standard at the summary judgment stage, not the pleading stage, and courts are currently split on what constitutes causation under the AKS.

The instant court said there only need be a link, as in cases where the doctor who actually received an alleged kickback uses a respondent’s services. The instant complaint pleaded a quid pro quo arrangement providing the necessary link. The pharmacy would allegedly pay the marketers directly tied to the volume and value of prescription referrals allegedly induced from the physicians without a bona fide patient-doctor relationship.

As to whether the complaint failed to allege that any payment recipient had the authority to unduly influence or select a medical provider, the pharmacy asked the court to consider a Fifth Circuit case distinguishing between intent to induce “referrals,” which is illegal, and intent to compensate advertisers, which is permissible. However, the instant court found the complaint here supported an inference of kickbacks due to prohibited undue influence after the pharmacy submitted a successful false claim.

The pharmacy parties further cited to United States v. Schena, 142 F. 4th 1217 (9th Cir. 2025) for the proposition that it foreclosed the government’s theory of per se AKS violation through payment of a percentage-based compensation structure consisting of volume-based sales commissions to independent sales representatives who then promoted the pharmacy’s services to prescribing physicians. The instant court distinguished that the Schena court considered the Eliminating Kickbacks in Recovery Act (EKRA) statute, not the AKS, albeit Schena analogized to the relevant AKS provision here. However, Schena did not foreclose the government’s case because the government alleged incentives to increase both the value and volume of prescriptions, regardless of patient need, in satisfaction of Schena. To whatever extent Schena’s interpretation of EKRA applied to the AKS, Schena did not foreclose the government’s claims here.

As for the element of materiality, the pharmacy parties argued the complaint only assumed materiality, but the court noted courts following the Escobar standard have held AKS violations are per se material. See Universal Health Services, Inc. v. United States ex rel. Escobar, 579 U.S. 176 (2016). The court found the materiality requirement satisfied for pleading purposes.

Unjust enrichment. The court granted dismissal of the government’s unjust enrichment claim because an adequate remedy at law appeared to be available under the FCA, and the government did not address this argument. The court also ruled amendment would be futile, so it dismissed the unjust enrichment claim with prejudice.

Mistaken payment. The pharmacy parties argued the court should dismiss the government’s payment by mistake claim because the complaint did not describe any specific mistaken belief by the government, apart from implying that the government made payments without knowledge of the alleged kickbacks. The pharmacy parties argued the government should detail what the mistake was and how it impacted payment, but the court denied dismissal here because they did not cite any authority in support of dismissal.

The case is No. 2:21-cv-00184-GMN-DJA.

Judge: Navarro, G.

Attorneys: Summer Allegra Johnson, U.S. Attorney's Office, for U.S. Cameron Powell (Gregor Wynne Arney PLLC) for PCPLV LLC d/b/a Pinnacle Compounding Pharmacy.

Companies: PCPLV LLC d/b/a Pinnacle Compounding Pharmacy

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