People For the American Way

Trump Judge Upholds Dismissal of False Claims Act Lawsuit Concerning Medicare Drug Price Fraud: Confirmed Judges, Confirmed Fears

News and Analysis
Trump Judge Upholds Dismissal of False Claims Act Lawsuit Concerning Medicare Drug Price Fraud:  Confirmed Judges, Confirmed Fears
Pills by George Hodan

Confirmed Judges, Confirmed Fears” is a blog series documenting the harmful impact of President Trump’s judges on Americans’ rights and liberties. Cases in the series can be found by issue and by judge at this link.

 

Trump Seventh Circuit judge Amy St. Eve wrote a 2-1 decision upholding the dismissal without trial of a whistleblower suit under the False Claims Act (FCA) contending that a major food and drug store chain had committed fraud by significantly overbilling Medicare on drug prices. The August 2021 decision was in USA ex rel Schutte v SuperValu Inc.

Two pharmacists, one of whom was a whistleblower who worked at Supervalu, filed an FCA lawsuit against supermarket chain Supervalu, contending that the company was overbilling and defrauding Medicare by reporting higher prescription drug prices that did not reflect actual prices offered through discounts. According to the complaint, during the 2006-16 period, Supervalu reported “usual and customary” prices for Medicare reimbursement that were as much as “eight to 15 times higher” than the prices charged to most cash customers. A district judge granted summary judgment to Supervalu without trial and dismissed the case, and the pharmacists appealed.

Trump judge St. Eve wrote a 2-1 opinion affirming the lower court. She maintained that even if the claims filed were false, under a 2007 Supreme Court decision, a corporation must “know that its claim is false,” and that it is not enough that it “might suspect, believe or intend to file a false claim” to the government. She agreed with the lower court that there was no material dispute about the fact that there was an interpretation of the Medicare law under which it was permissible for a company to bill Medicare at its list prices rather than actual prices, and that the pharmacists could not prove that Supervalu knew it was submitting false claims.

Judge David Hamilton dissented. He explained that St. Eve’s ruling meant that companies can never be liable under the FCA as long as they can “claim that there is some legal ambiguity that kept them from ‘knowing’ for certain that their claims were false.” The result, he went on, is a legal loophole “for deliberate or reckless fraudsters whose lawyers can concoct a post hoc legal rationale that can pass a laugh test.” He explained that under the proper interpretation of the FCA, the pharmacists had come forward with evidence that Supervalu’s inflated price claims were “knowingly” false, and that it was thus wrong to grant summary judgment without a trial to a jury. This included documents showing that company executives knew that submitting actual drug prices to Medicare “could cost Supervalu tens of millions of dollars per year.” A “reasonable jury,” Hamilton wrote, could find that Supervalu “actually knew” that it was filing “false, hugely inflated claims for reimbursement” from Medicare.

But as a result of Trump judge St. Eve’s “misguided holding,” as Hamilton put it, the pharmacists will not get a chance to prove their claims of fraud and corporations like Supervalu will be more likely to get away with “deliberate or reckless” false claims for precious government funds. The case is yet another example, as part of our fight for our courts, of the need to confirm more fair-minded nominees by President Biden to the Seventh Circuit and federal courts across the country.