United States District Court, D. Massachusetts
UNITED STATES OF AMERICA ex rel. JAMES BANIGAN AND RICHARD TEMPLIN et al.
MEMORANDUM OF DECISION
ZOBEL SENIOR UNITED STATES DISTRICT JUDGE
2007, relators James Banigan and Richard Templin brought this
qui tam action on behalf of the United States of
America, twenty-seven states, and two cities under the
federal False Claims Act (“FCA”), 31 U.S.C.
§§ 3729-33, and various state and local analogs,
against pharmaceutical company Organon USA Inc. and related
companies, and long-term care pharmacy providers Omnicare,
Inc. and PharMerica, Inc. All defendants save PharMerica have
since settled. In 2012, I dismissed all federal and local
claims against PharMerica, as well as eighteen state claims.
United States ex rel. Banigan v. Organon USA Inc.,
883 F.Supp.2d 277, 299 (D. Mass. 2012) (“Banigan
I”). The parties later voluntarily dismissed all
but three of the remaining state claims - Louisiana,
Michigan, and Texas - which are the target of defendant's
instant motion to dismiss. Docket # 517. Relators seek to
revive the claims dismissed in 2012. Docket # 519 (Amended
Motion for Reconsideration).
provides civil penalties against any person who makes false
or fraudulent claims to the United States Government, or who
knowingly causes such a claim to be paid. 31 U.S.C.
§§ 3729(a)(1)-(3), (7). The claims in this case are
predicated on the Anti-Kickback Statute, 42 U.S.C. §
1320a-7b(b), compliance with which is a condition of payment
for any claim submitted to a federal health care program,
including Medicaid. See United States ex rel.
Westmoreland v. Amgen, 812 F.Supp.2d 39, 54-55 (D. Mass.
2011) (collecting cases holding that violations of the
Anti-Kickback Statute triggers FCA liability).
care pharmacy providers (“LTCPs”) like defendant
PharMerica serve as pharmacies to nursing homes and similar
facilities whose residents are largely Medicaid patients. For
each state Medicaid program to which they submit prescription
drug reimbursement claims, LTCPs must enter provider
agreements requiring compliance with all state and federal
laws, including the Anti-Kickback Statute. Relators are
former Organon employees who allege that from 1999 through
2005 the company violated the Anti-Kickback Statute by
offering financial incentives to LTCPs including PharMerica
to prescribe its antidepressant Remeron. Pursuant to this
scheme, relators allege that PharMerica filed hundreds of
millions of dollars in fraudulent claims for Medicaid drug
reimbursements in violation of the FCA.
the law of the case that this kickback scheme was first
revealed in a 2002 complaint filed in the Eastern District of
Louisiana. See Banigan I, 883 F.Supp.2d at 288
(citing United States ex rel. St. John La Corte v.
Amerisource Bergen Corp. and PharMerica, Inc., No.
02-3168 (E.D.La.) (“Amerisource”)).
Because the FCA rewards only relators who alert the
government to fraud of which it previously had no knowledge,
I held the bulk of claims in Banigan I to be
jurisdictionally barred by the earlier Amerisource
action. Specifically, the FCA's “public disclosure
bar” provides that “[n]o court shall have
jurisdiction over an action ... based upon the public
disclosure of allegations or transactions in a ... civil ...
hearing ..., unless the action is brought by the Attorney
General or the person bringing the action is an original
source of the information.” 31 U.S.C. §
3730(e)(4)(A) (2006). Banigan I applied the public
disclosure bar without analysis of the exception for original
sources, 883 F.Supp.2d at 289, and relators moved for
threshold question in a False Claims Act case is whether the
statute bars jurisdiction.” United States ex rel.
Duxbury v. Ortho Biotech Prod., L.P., 579 F.3d 13, 20-21
(1st Cir. 2009) (quoting United States ex rel. Rost v.
Pfizer, Inc., 507 F.3d 720, 727 (1st Cir. 2007)).
Because jurisdiction “in gross” is unavailable
under the FCA, “[a] relator's eligibility to assert
each claim alleged in the complaint must be examined
separately.” United States ex rel. Nowak v.
Medtronic, Inc., 806 F.Supp.2d 310, 326 (D. Mass. 2011)
(citing Rockwell Int'l Corp. v. United States,
549 U.S. 457, 476 (2007)). “The proponent of federal
jurisdiction bears the burden of proving its existence by a
preponderance of the evidence.” United States ex
rel. Ondis v. City of Woonsocket, 587 F.3d 49, 54 (1st
Cir. 2009). At this stage, I nonetheless accept as true all
well-pleaded facts and resolve all reasonable inferences in
relators' favor. See United States ex rel. Winkelman
v. CVS Caremark Corp., 827 F.3d 201, 206 (1st Cir.
press their original source status as basis both for reviving
the federal claims and nine of the state claims dismissed in
Banigan I, and for denying PharMerica's motion
to dismiss the three state claims that remain. PharMerica,
conversely, insists that because relators are not original
sources, the public disclosure bar compels dismissal of all
remaining claims. I begin with the statute -- which the
parties agree governs their state claims -- before turning
to a factual analysis of what each relator knew when,
according to the Third Amended Complaint (“TAC”).
The “Original Source” Exception
original source exception to the public disclosure bar
represents the FCA's central purpose in “[s]eeking
the golden mean between adequate incentives for
whistle-blowing insiders with genuinely valuable information
and discouragement of opportunistic plaintiffs who have no
significant information to contribute of their own.”
United States ex rel. Ven-A-Care of the Fla. Keys, Inc.
v. Baxter Healthcare Corp., 772 F.3d 932, 944 (1st Cir.
2014) (quoting Graham Cnty. Soil & Water Conservation
Dist. v. United States ex rel. Wilson, 559 U.S. 280, 294
(2010)). As defined by statute at the time relators'
complaint was filed, an original source is “an
individual who has direct and independent knowledge
of the information on which the allegations are based and has
voluntarily provided the information to the Government before
filing an action under this section which is based on the
information.” 31 U.S.C. § 3730(e)(4)(B) (2006)
relator's knowledge is ‘direct' if he
acquired it through [his] own efforts without an intervening
agency, and it is ‘independent' if [his] knowledge
is not dependent on the public disclosure.” United
States ex rel. O'Keeffe v. Sverdup Corp., 131
F.Supp.2d 87, 93 (D. Mass. 2001). Ultimately, “direct
and independent knowledge must be something more than
secondhand information or collateral research and
investigations.” In re Pharm. Indus. Average
Wholesale Price Litig., No. 01-cv-12257, 2010 WL
1375298, at *2-3 (D. Mass. Mar. 25, 2010)
(“AWP”) (citations omitted). “The
Court thus takes as its touchstone the purpose behind the
statute, to encourage suits by those who are ‘close
observers or otherwise involved in the fraudulent
activity.'” Id. at *5, (quoting discussion
of legislative history in United States ex rel. Barth v.
Ridgedale Elec., Inc., 44 F.3d 699, 703 (8th Cir.
Relators' Roles and ...