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Thulin v. Shopko Stores Operating Co., LLC

United States Court of Appeals, Seventh Circuit

November 12, 2014

CARL E. THULIN, Plaintiff-Appellant,
v.
SHOPKO STORES OPERATING CO., LLC, Defendant-Appellee

Argued April 25, 2014.

Appeal fro the United States District Court for the Western District of Wisconsin, No. 3:10-cv-00196 - William M. Conley, Judge.

For Carl E. Thulin, Plaintiff - Appellant: Ross Begelman, Attorney, Begelman, Orlow & Melentz, Cherry Hill, NJ.

For Shopko Stores Operating Co., Llc, doing business as: SHOPKO, doing business as: PAMIDA, Defendant - Appellee: Matthew J. Splitek, Attorney, Quarles & Brady Llp, Madison, WI; Thomas S. Crane, Attorney, Mintz, Levin, Cohn, Ferris, Glovsky & Popeo, Boston, MA.

Before KANNE and ROVNER, Circuit Judges, and DOW, District Judge.[*]

OPINION

Page 995

Dow, District Judge.

Relator Carl E. Thulin worked as a pharmacist at a Shopko retail store in Idaho from 2006 to 2009. During his tenure, Thulin observed what he believed to be a fraudulent billing scheme in which Shopko submitted inflated claims for prescription drugs to the federal Medicaid program. Thulin filed a qui tam complaint against his former employer in its home state of Wisconsin, alleging that Shopko violated the federal False Claims Act by overbilling Medicaid. Thulin also asserted analogous claims under the laws of eight different states in which Shopko does business. Shopko moved to dismiss Thulin's federal claim under Federal Rules of Civil Procedure 9(b) and 12(b)(6). The district court granted the motion and declined to exercise supplemental jurisdiction over Thulin's state law claims. Finding no error, we affirm.

I.

Because this appeal comes to us from the grant of a motion to dismiss, we accept all facts alleged in Thulin's complaint as true and draw all reasonable inferences in his favor. Shopko is a multi-regional retail pharmacy corporation headquartered in Green Bay, Wisconsin, that operates nearly 300 stores in 24 states. Thulin is a licensed pharmacist who at all relevant times worked as a full-time pharmacist at a Shopko retail store in Idaho.

Some of Shopko's pharmacy customers have prescription coverage through both private insurance and Medicaid, a federal program administered by the states that provides the poor, disabled, and elderly with medical and pharmaceutical insurance coverage. We follow the parties' convention of referring to these individuals as " dual-eligibles." For dual-eligibles, Medicaid acts as a " payer of last resort," which means that it picks up any tab remaining after the dual-eligible's private insurer has paid the amount that it has contracted to pay Shopko for a particular prescription.

According to Thulin, an excess tab almost always exists. Both Medicaid and private insurers strive to negotiate pharmaceutical discounts and purchasing agreements for their members, but Thulin asserts that private insurers are much better at playing ball than are the government agencies administering Medicaid. The private insurers' negotiating prowess " results in better pricing of prescriptions for the [privately] insured patients." Thulin alleges that this disparity exists in all of the states in which Shopko does business. Thus, when Shopko enters into provider contracts with private insurers, it typically agrees to accept payment in full lesser amounts than it agrees to accept from Medicaid for any given drug. The amount that Shopko agrees to accept is composed of some payment by the insurance company and a co-pay or deductible paid by the patient at the point of sale. The size of the patient's co-pay depends on his or her contract with the private insurance company, to which Shopko is not a party. Privately insured patients, including dual-eligibles, are not parties to the contracts that Shopko signs with their private insurers.

Thulin alleges that when dual-eligibles apply for Medicaid, they are required by 42 U.S.C. § 1396k(a)(1)(A) and 42 C.F.R. § 433.145 to assign to the state any rights they have under their private insurance plans. Thulin alleges that one of these assignable rights is the right to purchase prescription drugs at the lower price that their private insurer negotiated with Shopko. Because dual-eligibles are not parties to the contracts that Shopko signs with their private insurers, however, they do " not know the price they have ...


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