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United States ex rel. Fox Rx, Inc. v. Omnicare, Inc.

United States District Court, S.D. New York

December 1, 2014

UNITED STATES OF AMERICA, et al.,
v.
OMNICARE, INC., NEIGHBORCARE, INC., PHARMERICA CORP., and MANAGED HEALTH CARE ASSOC., INC., Defendants. ex rel. Fox Rx, Inc., Plaintiff,

For relator Fox Rx, Inc.: Michael I. Leonard, LEONARD LAW OFFICES, Chicago, IL.

Paul A. Traina, ENGSTROM, LIPSCOMB & LACK, PC, Los Angeles, CA.

Dennis J. Doody, Tarrytown, NY.

For defendant Managed Health Care Associates Long Term Care Network Inc.: Daniel S. Ruzumna, Adam Blumenkrantz, PATTERSON BELKNAP WEBB & TYLER LLP, New York, NY.

OPINION & ORDER

DENISE COTE, District Judge.

Fox Rx, Inc. ("Fox"), a serial qui tam relator and former Medicare Part D plan sponsor, has brought at least a half-dozen actions under the False Claims Act, 31 U.S.C. § 3729 et seq. ("FCA"), around the country against entities with which it once worked, among others. This is one such action, which was dismissed on August 12, 2014. See United States ex rel. Fox Rx, Inc. v. Omnicare, Inc., ___ F.Supp.2d ___, 2014 WL 3928780 (S.D.N.Y. Aug. 12, 2014) (the "August 12 Opinion"). Five others have been dismissed as well. Defendant MHA Long Term Care Network ("MHA LTC") now moves for an award of attorneys' fees and costs pursuant to 31 U.S.C. § 3730, which authorizes such an award in certain FCA actions where "the court finds that the claim... was clearly frivolous, clearly vexatious, or brought primarily for purposes of harassment." For the reasons stated below, the Court finds MHA LTC is entitled to fees and costs incurred since January 10, 2014.

BACKGROUND

I. Fox's Claims

Fox filed this action on January 12, 2012 on behalf of the United States, the District of Columbia and twenty-one states. Fox's Second Amended Complaint ("SAC"), filed on February 10, 2014, contained twenty-five counts. In broad strokes, the SAC asserted that the defendants had engaged in two illegal practices: (1) defendants failed to substitute generic drugs for brand-name drugs in states that have laws mandating such substitution, and (2) defendants dispensed drugs after the termination date of a national drug code in states that have laws prohibiting pharmacies from dispensing drugs beyond their shelf-life expiration dates. Fox asserted that, by engaging in such practices, defendants falsely indicated in "submissions" to a federal agency that the drugs they dispensed were "covered" by Medicare, and overcharged Medicare and Medicaid.

II. The ProCare Provider Agreement

MHA LTC contracts with independent long-term care pharmacies to, inter alia, negotiate reimbursement rates on their behalf and manage Medicare Part D claims. MHA LTC enters into agreements with Pharmacy Benefits Managers ("PBMs") on behalf of the pharmacies in its network (the "Network Pharmacies") that allow the PBMs to provide claims adjudication services when claims are submitted to Medicare and Medicaid for payment. MHA LTC is not itself a pharmacy, does not itself dispense drugs, and exercises no control or supervision of the Network Pharmacies' dispensing.

One such agreement, executed by MHA LTC and ProCare PBM ("ProCare") (the "ProCare Provider Agreement"), was attached as an exhibit to the SAC. In that document MHA LTC agreed, on behalf of the Network Pharmacies, that the "Pharmacy Provider" had certain obligations. A "Pharmacy Provider" was defined in that agreement as the "dispenser of drug products and/or services, acting either as, but not limited to, a single (independent) or multiple (chain) entity that has entered into this Agreement with ProCare PBM." The Procare Agreement also defined a "Drug Product or Service" as "[a]ny drug medication or consultation service (required to be given in connection with a drug medication) rendered to a Covered Person by Pharmacy Provider."

The ProCare Agreement sets out certain obligations of Pharmacy Providers, including

[the] obligation to ensure that any pharmacist who is performing on behalf of the Pharmacy Provider shall use his or her professional judgment when filling prescript orders, and will comply with all legal, professional and ethical obligations applicable to pharmacists under the ...

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