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United States of America ex rel. Verrinder v. Wal-Mart Corp.

United States District Court, D. Massachusetts

June 21, 2016

UNITED STATES OF AMERICA ex rel. WILLIAM VERRINDER, Plaintiff,
v.
WAL-MART CORPORATION, et al. Defendants.

          MEMORANDUM AND ORDER

          Patti B. Saris Chief United States District Judge

         INTRODUCTION

         Relator William Verrinder, a pharmacist, alleges that pharmacies operated by Wal-Mart Stores Incorporated (Wal-Mart), Kmart Corporation (Kmart), [1] and Rite Aid Corporation (Rite Aid) violated the False Claims Act, 31 U.S.C. § 3729 et seq. (FCA) by selling prescription drugs labeled with incorrect expiration dates and then billing the government for expired drugs. Relator, who worked at all three pharmacies, [2] contends that the defendants submitted various false claims to Medicare or Medicaid: (1) claims for prescriptions that will expire before the dates printed on the prescription vial label and before the patient can consume the medication as directed by his doctor, (2) claims for dispensing fees that inflated the number of unexpired doses dispensed, and (3) claims (by Kmart only) for the reimbursement of generic drugs using a false national drug code number for more expensive drugs.

         The relator filed his first complaint on April 8, 2013, and an amended complaint on August 6, 2013, in the District of Maine. The case was then transferred to this district on May 9, 2013. On March 7, 2014, the Government declined to intervene. On October 12, 2015, the defendants moved to dismiss for failure to satisfy Federal Rules of Civil Procedure 9(b) and 12(b)(6). After hearing, the Court ALLOWS the motions by Rite Aid and Wal-Mart (Docket Nos. 61 and 63), and the motion by Kmart (Docket No. 59) with respect to the allegations of false claims for expired drugs. The Court will dismiss the claim against Kmart with respect to the alleged false billing of generic drugs in North Carolina unless the relator’s complaint is amended to comply with Rule 9(b) within 30 days of this order.

         FACTUAL BACKGROUND

         With all reasonable inferences drawn in the relator’s favor, the amended complaint alleges the following facts with respect to each defendant.

         I. Wal-Mart

         Wal-Mart fills approximately 500 million prescriptions annually, 150 million of which are submitted to Medicare Part D and Medicaid. On average “about 15%” of the manufacturers’ stock bottles of prescription medications expire in less than one year. Docket No. 20, Compl. ¶ 12. Wal-Mart’s claim submission software, Connexus, automatically affixes a one-year expiration date to each prescription’s label. Connexus also automatically submits claims for reimbursement to Medicare and Medicaid for refills while automatically assigning a one-year expiration date from the date prescriptions are refilled. The software automatically assigns a one-year expiration date even for “compounds that typically expire in a few days to weeks.” Id. ¶ 14. Pharmacists sometimes change these dates “when necessary, ” but Wal-Mart may also submit claims for refills “without any human being checking the validity of the expiration date.” Id.

         Automatically generating a one-year expiration date expedites the prescription-filling process; pharmacists do not need to review the date listed on the stock bottles first. And time is of the essence at Wal-Mart: the company times each step of the filling process and “reprimand[s] pharmacy technicians or pharmacists who take too long to complete any of the steps.” Id. Pharmacists are allocated just over 60 seconds to complete all tasks related to a single prescription.

         Wal-Mart removes stock bottles that are set to expire within three months, minimizing the risk that expired medications are dispensed. Wal-Mart pharmacies also return unused drugs, even before they are on the verge of expiration, based on data gathered from non-usage reports.

         Relator identifies seven individuals involved in this allegedly fraudulent scheme: three executives who approved the process and four pharmacists who have filled prescriptions with incorrect expiration dates and then submitted claims to Medicare and Medicaid with these false dates.

         II. Rite Aid

         When Rite Aid fills a prescription, it uses proprietary software to automatically enter a one-year expiration date on all prescriptions. Rite Aid pharmacists then submit claims to Medicare and Medicaid with this one-year expiration date. Rite-Aid pharmacies have drugs on their shelves that expire in as little as 30 days. Relator estimates that “about 15%” of stock bottles on Rite Aid’s shelves at any given moment expire in less than one year. Id. ¶ 32. Rite Aid does not require pharmacists to remove “sufficiently beforehand” medications that will soon expire from its pharmacies’ shelves, though Rite Aid does at some point send drugs back to its reverse distributor. Id. ¶ 33.

         III. Kmart

         Kmart automatically assigns a one-year expiration date to prescriptions. However, it does not automatically submit claims to Medicare and Medicaid with this default date. Kmart pharmacists submit Medicare and Medicaid claims knowing “that Kmart pharmacies have drugs that expire in as little as 30 days” and ...


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