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Guerdon Green v. AmerisourceBergen Corp.

United States District Court, S.D. Texas, Houston Division

March 31, 2017

GUERDON GREEN, et al, Plaintiffs,
v.
AMERISOURCEBERGEN CORPORATION, et al, Defendants.

          MEMORANDUM OPINION AND ORDER

          Kenneth M. Hoyt United States District Judge.

         I. Introduction

         Pending before the Court is the defendants', AmerisourceBergen Corporation, Cardinal Health, Inc., and McKesson Corporation (collectively the “defendants”) Joint Motion to Dismiss Relator's Third Amended Qui Tam Complaint pursuant to Rules 12(b)(1), 12(b)(6), 8(a) & 9(b) of the Federal Rules of Civil Procedure (Dkt. No. 45) and Memorandum in Support (Dkt. No. 46). The Relator, Guerdon Green (“Relator”), filed a response in opposition (Dkt. No. 52), to which the defendants filed a reply (Dkt. No. 55). After having carefully reviewed the motions, the responses and the applicable law the Court GRANTS the defendants' joint motion to dismiss.

         II. Factual Background

         The following allegations are found in the Relator's Third Amended Qui Tam Complaint (“Complaint”). The Relator joined Syntegra Solutions, Inc. (“Syntegra”) in 2003 as the Vice President of Sales and Marketing. The current Complaint asserts that Syntegra was retained by manufacturers to audit the defendant wholesalers. Syntegra conducted two main auditing functions: chargeback audits and operational audits. While at Syntegra, Relator managed corporate relationships and conducted closing meetings at the conclusion of each audit. See (Dkt. No. 19 at 7). The Relator alleges that through his work at Syntegra the Relator uncovered the fraudulent acts of the defendants.

         Pursuant to the qui tam provisions of the Federal False Claims Act (“FCA”), 31 U.S.C. § 3730, Relator filed the initial complaint in this action on or about February 9, 2015, filed an amended complaint on or about March 9, 2015, and filed the Complaint on or about January 5, 2016. Relator completed service of the Complaint and the disclosure statement required by 31 U.S.C. § 3730(b)(2) on the Attorney General and the United States Attorney's Office for this District. On November 9, 2015, the United States declined to intervene, as did each State named in the first two complaints.

         In his Complaint, the Relator alleges that the defendants-three large pharmaceutical wholesalers-engaged in conduct that caused drug manufacturers to underpay rebates owed to Medicaid pursuant to the Medicaid Drug Rebate Program (“MDRP”), 42 U.S.C. § 1396r-8. Under the MDRP, drug manufacturers are required to calculate the Average Manufacturer Price (“AMP”) for each of their outpatient drugs covered by Medicaid, report those AMPs to the Centers for Medicare and Medicaid Services (“CMS”) on a quarterly basis, and pay quarterly rebates to State Medicaid programs that based, in part, on the reported AMPs. The AMP for each covered drug is generally based on the average unit price manufacturers receive from wholesalers (or after passage of the Affordable Care Act in 2010, from wholesaler and retail pharmacies purchasing directly from manufacturers) during the relevant time period, net of discounts and other price concessions that lower the amounts actually paid for the drug.

         The conduct at issue in this case relates to “chargebacks, ” which are payments that drug manufacturers make to wholesalers when the wholesalers are contractually required to sell the manufacturers' drugs to their retail customers at special reduced prices pursuant to contracts between the manufacturers and retailers. The Relator's Complaint alleges that the defendants submitted and continue to submit false data to manufacturers in the form of the 844 Data Set. The Relator argues that the accuracy of the 844 Data Set is important to manufacturers because the information within this Data Set is used to calculate AMP. Relator claims that the comparison of the 844 Data Set to the 867 Data Set exposed the defendants' fraudulent activities.

         The Relator further alleges that the defendants violated the FCA by engaging in four types of misconduct associated with chargebacks: (1) failing to issue “reverse chargebacks” to the drug manufacturers when retailers returned drugs for which the defendants had previously received chargeback payments from the manufacturers; (2) submitting duplicate chargeback requests to the manufacturers; (3) refusing to issue reverse chargebacks to the manufacturers when the amounts due do not exceed a threshold amount, or when the customer returns occur after a threshold period of time; and (4) submitting fraudulent chargeback requests. Relator contends that each of these improper practices artificially affected the net amounts the drug manufacturers received for sales of their products, causing the manufacturers to calculate and report artificially reduced AMPs to CMS, thereby causing the manufacturers to underpay MDRP rebates due to State Medicaid programs, and further causing the United States to be overcharged for payments to the State Medicaid programs.

         III. Contentions of the Parties

         A. The Defendants' Contentions

         The defendants have moved to dismiss the Relator's claims. The defendants aver that Relator's Complaint fails to state a claim on which relief can be granted, and it fails to satisfy the heightened pleading standard required for FCA claims. The defendants further allege the following arguments. First, Relator's allegations are based on and are substantially the same as prior publicly available information and, thus, the public-disclosure bar precludes his claims. Second, Relator's theory of liability rests on a fundamental misreading of the applicable statute and regulations concerning the calculation of AMP. Third, the Complaint fails to satisfy Rules 8 and 9(b) of the Federal Rules of Civil Procedure because Relator does not plead a plausible factual basis for relief, i.e. requisite scienter, and particular facts demonstrating the existence of fraudulent action. Accordingly, the defendants argue that their motion to dismiss should be granted.

         B. The Relator's Contentions

         The Relator alleges that from 2004 to the present, the defendants fraudulently concealed and withheld chargeback payments from the manufacturers, causing the manufacturers to underreport AMP. The Relator argues that the defendants' fraudulent activities caused the manufacturers to commit fraud against the federal government. The Relator alleges that his Complaint clearly satisfies the Rule 9(b) standard promulgated by the Fifth Circuit requiring “particular details” of a fraudulent scheme and “reliable indicia” that false claims were presented. The Relator argues that the defendants' public disclosure defense is not applicable, arguing that the defendants' “public disclosures” fail to qualify as public disclosures under both guidelines set by the Fifth Circuit as well as 31 U.S.C. §3730(e)(4)(A)(ii) and (iii). Finally, the Relator asks that the Court deny the defendants' motion to dismiss.

         IV. Standard of Review

         A. Rule 12(b)(1)

         “ ‘[A] challenge under the FCA jurisdictional bar is necessarily intertwined with the merits' and is, therefore, properly treated as a motion for summary judgment.” U.S. ex rel. Reagan v. E. Texas Med. Ctr. Reg'l Healthcare Sys., 384 F.3d 168, 173 (5th Cir. 2004) (quoting Laird, 336 F.3d at 352). “A grant of summary judgment is proper if, viewing the evidence and inferences drawn from that evidence in the light most favorable to the non-moving party, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law.” Id. (citing Fed.R.Civ.P. 56(c)). At the summary judgment stage, a court may not weigh the evidence or evaluate the credibility of witnesses, and all justifiable inferences will be made in the non-moving party's favor. Morris v. Covan Worldwide Moving, Inc., 144 F.3d 377, 380 (5th Cir.1998).

         Federal Rule of Civil Procedure Rule 12(b)(1) permits the dismissal of an action for the lack of subject matter jurisdiction. “If [a federal] court determines at any time that it lacks subject-matter jurisdiction, [it] must dismiss the action.” Fed.R.Civ.P. 12(h)(3). Because federal courts are considered courts of limited jurisdiction, absent jurisdiction conferred by statute, they lack the power to adjudicate claims. See, e.g., Stockman v. Fed. Election Comm'n, 138 F.3d 144, 151 (5th Cir. 1998) (citing Veldhoen v. United States Coast Guard, 35 F.3d 222, 225 (5th Cir. 1994). Therefore, the party seeking to invoke the jurisdiction of a federal court carries “the burden of proving subject matter jurisdiction by a preponderance of the evidence.” Vantage Trailers, Inc. v. Beall Corp., 567 F.3d 745, 748 (5th Cir. 2009) (citing New Orleans & Gulf Coast Ry. Co. v. Barrois, 533 F.3d 321, 327 (5th Cir. 2008); see also Stockman, 138 F.3d at 151.

         When evaluating jurisdiction, “a [federal] court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case.” MDPhysicians & Assoc., Inc. v. State Bd. of Ins., 957 F.2d 178, 181 (5th Cir. 1992) (citing Williamson v. Tucker, 645 F.2d 404, 413 (5th Cir. 1981)); see also Vantage Trailers, 567 F.3d at 748 (reasoning that “[i]n evaluating jurisdiction, the district court must resolve disputed facts without giving a presumption of truthfulness to the plaintiff's allegations.”) In making its ruling, the court may rely on any of the following: “(1) the complaint alone, (2) the complaint supplemented by undisputed facts evidenced in the record, ...


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