United States District Court, S.D. Texas, Houston Division
MEMORANDUM OPINION AND ORDER
Kenneth M. Hoyt United States District Judge.
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.
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
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.
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.
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
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.
Contentions of the Parties
The Defendants' Contentions
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.
The Relator's Contentions
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.
Standard of Review
‘[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).
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.
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, ...