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Doe v. Houchens Industries, INC.

United States District Court, Southern District of Indiana, Indianapolis Division

January 9, 2015



RICHARD L.YOUNG, CHIEF JUDGE United States District Court Southern District of Indiana

Relator brings qui tam claims on behalf of the United States under the False Claims Act (“FCA”), 31 U.S.C. § 3729(a)(1)(A) & (B), and the related false claims acts of the State of Indiana and the State of Illinois. Relator alleges that Defendant, Houchens Industries, Inc., violated the FCA by misrepresenting its usual and customary drug prices on standardized claim forms and over-charged Medicare Part D and the Indiana and Illinois Medicaid programs for generic drugs sold at retail. Houchens now moves to dismiss Relator’s Complaint as it pertains to the United States and the State of Illinois[1]

for failure to state a claim upon which relief can be granted. For the reasons set forth below, the motion is DENIED.

I. Background

In 2008, Houchens purchased Buehler’s Buy-Low and its pharmacies from Buehler Foods, Inc., and thereafter renamed the stores “Hometown IGA.” (Complaint ¶ 10). Houchens currently operates 10 Hometown IGA’s in Indiana and one in Illinois. (Id.).

Shortly after it acquired Buehler’s Buy-Low, Houchens noted the popularity of Wal-Mart’s discount program for generic pharmaceuticals, and decided to start its own, naming it the “IGA Hometown Pharmacy Rewards Program.” (Id. ¶ 46). The Rewards Program was originally called “500 for $5, ” meaning a cash-paying customer who enrolled in the Program would be charged $5.00 for the 500 generics on the Program list. (Id. ¶ 47). According to the Complaint, as part of the enrollment process, Relator was instructed to collect a small fee from the enrollees and give them a gift card in the same amount to offset the fee. (Id.). Under the Rewards Program, claims went through an online discount plan called Medical Security Card (“MSC”). (Id.). MSC then charged Houchens $1.00 for each claim. (Id.).

Houchens later modified the Rewards Program to 400 generics for $3.99 for a 30-day supply, $6.99 for a 60-day supply, and $9.99 for a 90-day supply, and eliminated the use of MSC. (Id. ¶ 48). Hometown IGA Director, Glen Millikan, RPh, and Assistant Director, Leslie Bidwell, instructed Relator and the other pharmacy staff that when billing Medicare Part D and other third parties for a generic drug on the Program list, she was not to change the price plan to the discounted Program price unless the customer’s co-pay exceeded $3.99. (Id. ¶ 49). According to Relator, Houchens overcharged the plaintiff governments by seeking reimbursement for the generic drugs in an amount in excess of the “usual and customary” (“U&C”) price it typically charges its cash paying customers – i.e., the Rewards Program price. (Id. ¶ 49). Relator alleges that this practice violates the Federal False Claims Act, 31 U.S.C. § 3729 et seq.; the Illinois Whistleblower and Protection Act, 740 ILCS 175/1 et seq.; and the Indiana State False Claim and Whistleblowers Protection Act, Ind. Code § 5-11-5.5-1 – 5-11-5.5-18.

II. The False Claims Act

Under the federal FCA, “‘private individuals . . . referred to as ‘relators, ’ may file civil actions known as qui tam actions on behalf of the United States to recover money that the government paid as a result of conduct forbidden under [the False Claims] Act.’” United States ex rel. Garbe v. Kmart Corp., 968 F.Supp.2d 978, 982-83 (S.D. Ill. 2013) (quoting United States ex rel. Yannacopoulos v. Gen. Dynamics, 652 F.3d 818, 822 (7th Cir. 2011)). The FCA imposes liability upon anyone who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval, ” or who “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(A) & (B). Because the elements of the Illinois Whistleblower and Protection Act, 740 ILCS 175/3, are virtually identical to the FCA, the court will analyze them together.

III. Standard of Review

Federal Rule of Civil Procedure 12(b)(6) allows dismissal of a claim for “failure to state a claim upon which relief may be granted.” Fed.R.Civ.P. 12(b)(6). In ruling on a motion to dismiss, the court construes the allegations of the complaint in the light most favorable to the plaintiff, and all well-pleaded, non-conclusory, factual allegations in the complaint are accepted as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Taken in this light, the complaint’s “allegations must plausibly suggest that the plaintiff has a right to relief, raising that possibility above a ‘speculative level.’” EEOC v. Concentra Health Servs., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Bell Atlantic v. Twombly, 550 U.S. 544, 555 (2007)). “A claim has a facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

Federal Rule of Civil Procedure 9(b) requires an elevated pleading standard for fraud claims, such as the claims asserted in this action. Under the heightened pleading standard, a relator must state with particularity the circumstances constituting fraud – i.e., the “who, what, when, where, and how.” Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 569 (7th Cir. 2012). That said, “Rule 9(b) does not require a relator to plead evidence and is to be read in conjunction with [Rule 8], which requires a short and plain statement of the claim.” United States ex rel. Garbe, 968 F.Supp.2d at 982.

IV. Discussion

Houchens moves to dismiss the Relator’s Complaint as it pertains to the United States and the State of Illinois for two reasons. First, the Rewards Program price for generic drugs is not the U&C price the Houchens’ Hometown IGAs charge to members of the public; therefore, Houchens did not file false claims to the plaintiff ...

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