United States District Court, D. Massachusetts
UNITED STATES OF AMERICA ex rel. MYRON D. WINKELMAN et al., Plaintiffs,
CVS CAREMARK CORPORATION et al., Defendant
For Myron Winkelman, Ex Rel, Plaintiff: Brian Wojtalewicz, LEAD ATTORNEY, PRO HAC VICE, Wojtalewicz Law Firm, Ltd., Appleton, MN; James G Vander Linden, LEAD ATTORNEY, PRO HAC VICE, LeVander & Vander Linden, P.A., St. Louis Park, MN; Robert P Christensen, LEAD ATTORNEY, PRO HAC VICE, Robert P. Christensen, P.A., St. Louis Park, MN; Timothy G. Lynch, Swartz, McKenna & Lynch, LLP, Boston, MA.
For Stephani Leflore, Ex Rel, Plaintiff: Timothy G. Lynch, Swartz, McKenna & Lynch, LLP, Boston, MA.
For United States of America, Ex Rel Myron Winkelman and Stephani Leflore, Plaintiff: Robert P Christensen, LEAD ATTORNEY, PRO HAC VICE, Robert P. Christensen, P.A., St. Louis Park, MN; Timothy G. Lynch, LEAD ATTORNEY, Swartz, McKenna & Lynch, LLP, Boston, MA; George B. Henderson, III, United States Attorney's Office, John Joseph Moakley Federal Courthouse, Boston, MA.
For California, State of, Connecticut, State of, Florida, State of, Georgia, State of, Illinois, State of, Indiana, State of, Commonwealth of Massachusetts, Michigan, State of, Minnesota, State of, New Hampshire, State of, New York, State of, Commonwealth of Virginia, Plaintiffs: Timothy G. Lynch, LEAD ATTORNEY, Swartz, McKenna & Lynch, LLP, Boston, MA.
For CVS Caremark Corporation, Caremark RX, Inc., Caremark PCS llc, Silverscript Insurance Company, Accendo Insurance Company, CVS Pharmacy, Inc., Caremark, LLC, Defendants: Craig D. Singer, Grant A. Geyerman, Holly M. Conley, LEAD ATTORNEYS, PRO HAC VICE, WILLIAMS & CONNOLLY LLP, Washington, DC; Enu Mainigi, LEAD ATTORNEY, Williams & Connolly LLP, Washington, DC; Diana K. Lloyd, James W. Evans, Choate, Hall & Stewart, Boston, MA.
For Silverscript, LLC, Defendant: Craig D. Singer, Holly M. Conley, LEAD ATTORNEYS, PRO HAC VICE, WILLIAMS & CONNOLLY LLP, Washington, DC; Diana K. Lloyd, James W. Evans, Choate, Hall & Stewart, Boston, MA.
MEMORANDUM AND ORDER
Denise J. Casper, United States District Judge.
Pursuant to the qui tam provisions of the False Claims Act (" FCA" ), 31 U.S.C. § 3730, plaintiff-relators Myron D. Winkelman (" Winkelman" ) and Stephani Martinsen (" Martinsen" ) (collectively, " Plaintiff-relators" ) filed this lawsuit against Defendants CVS Caremark Corporation, CVS Pharmacy, Inc., Silverscript, LLC, Caremark, Rx LLC, (f/k/a Caremark Rx, Inc.), Caremark, LLC (f/k/a Caremark, Inc.), Caremark PCS, LLC, Silverscript Insurance Company, and Accendo Insurance Company (collectively, " CVS" ) alleging a violations of the FCA, 31 U.S.C. § § 3729 et. seq., and the false claim acts of the states of California, Connecticut, Florida, Georgia, Illinois, Indiana, Massachusetts, Michigan, Minnesota, New York and Virginia (collectively, " the Plaintiff-states" ). D. 29. Defendants have moved to dismiss. D. 59. For the reasons stated below, the Court ALLOWS the motion.
II. Standard of Review
A. Motion to Dismiss for Failure to State a Claim
In considering a motion to dismiss for failure to state a claim upon which relief can be granted pursuant to Fed.R.Civ.P. 12(b)(6), the Court must determine if the facts alleged " plausibly narrate a claim for relief." Schatz v. Republican State Leadership Comm., 669 F.3d 50, 55 (1st Cir. 2012). " [T]he plaintiff need not demonstrate she is likely to prevail" at this stage, only that her claims are facially plausible. García-Catalá n v. United States, 734 F.3d 100, 102-03 (1st Cir. 2013). To state a plausible claim, a claim need not contain detailed factual allegations, but it must recite facts sufficient to at least " raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal citations omitted). This determination requires a two-step inquiry.
García-Catalán, 734 F.3d at 103. First, the Court must distinguish the factual allegations from the conclusory legal allegations in the complaint. Id. Second, taking the Plaintiff-relators' allegations as true, the Court should be able to draw " the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Haley v. City of Boston, 657 F.3d 39, 46 (1st Cir. 2011)).
When deciding a motion to dismiss, the First Circuit has " emphasize[d] that the complaint must be read as a whole," and that circumstantial evidence may be sufficient to surpass the plausibility threshold. Id. At bottom, a claim must contain sufficient factual matter that, accepted as true, would allow the Court " to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. However, " [i]n determining whether a [pleading] crosses the plausibility threshold, 'the reviewing court [must] draw on its judicial experience and common sense.'" Id. (quoting
Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). " This context-specific inquiry does not demand 'a high degree of factual specificity.'" Id. (internal citations omitted).
B. Motion to Dismiss for Lack of Subject Matter Jurisdiction
" When considering a motion to dismiss under subsection 12(b)(1) of the Federal Rules of Civil Procedure, the Court should apply a standard of review 'similar to that accorded a dismissal for failure to state a claim' under subsection 12(b)(6)."
Menge v. N. Am. Specialty Ins. Co., 905 F.Supp.2d 414, 416 (D.R.I. 2012) (quoting Murphy v. United States, 45 F.3d 520, 522 (1st Cir. 1995)); see Puerto Rico Tel. Co. v. Telecomm. Regulatory Bd. of Puerto Rico, 189 F.3d 1, 13 n.10 (1st Cir. 1999) (noting that " the standard of review . . . is the same for failure to state a claim and for lack of jurisdiction" ). In deciding a Rule 12(b)(1) motion, however, the Court may consider materials outside the pleadings. Gonzalez v. United States, 284 F.3d 281, 288 (1st Cir. 2002).
C. Motion to Dismiss for Pleading Fraud with a Lack of Particularity
" In alleging fraud . . . , a party must state with particularity the circumstances constituting fraud or mistake." Fed.R.Civ.P. 9(b). These heightened pleading requirements apply to claims brought under the FCA.
See, e.g., United States ex rel. Gagne v. City of Worcester, 565 F.3d 40, 45 (1st Cir. 2009) (noting that " the heightened pleading requirements of Fed.R.Civ.P. 9(b) apply to [FCA] claims" ); United States ex rel. Walsh v. Eastman Kodak Co., 98 F.Supp.2d 141, 147 (D. Mass. 2000) (same). In such cases, relators must satisfy the requirements of Rule 9(b) by setting forth the " the time, place, and content of an alleged false representation."
Gagne, 565 F.3d at 45 (citation omitted) (internal quotation mark omitted); Alternative Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 29 (1st Cir. 2004) (noting that Rule 9(b) requires the pleader " to specify the who, what, where, and when of the allegedly false or fraudulent representation" ). " Rule 9(b) may be satisfied if 'the complaint as a whole is sufficiently particular to pass muster under the FCA, although some questions remain unanswered.'" United States ex rel. Ge v. Takeda Pharmaceutical Co. Ltd., No. 10-cv-11043, 2012 WL 5398564, at *4 (D. Mass. Nov. 1, 2012) (citation omitted).
III. Factual Background
Unless otherwise noted, the facts are as alleged in the second amended complaint, D. 29.
A. Applicable Federal and State Programs
Plaintiff-relators allege that CVS billed Medicaid programs and Medicare Part D inflated prices for hundreds of generic drugs. D. 29 ¶ 3. Medicaid was established by Title XIX of the Social Security Act, 42 U.S.C. § § 1396 -- 1396v, as amended, and provides medical assistance for certain individuals and families with low incomes. Id. ¶ 17. Medicaid is jointly funded by the federal and state governments. Id. Although national guidelines are established by the federal government, " each state: (a) establishes its own eligibility standards; (b) determines the type, amount, duration and scope of services; (c) sets the rate of payment for services; and (d) administers its own program." Id. ¶ 18. For states to receive reimbursement, they must assure that their " aggregate payments must not exceed the lower of (1) the pharmacy's estimated acquisition cost plus a reasonable dispensing fee; or (2) the pharmacy's 'usual and customary charge to the general public' for the drug." Id. ¶ 20b ...