The Supreme Court has agreed to hear a whistleblower-initiated case that pharmacy operators SuperValu and Safeway submitted false Medicare and Medicaid reimbursement claims for prescription drugs.
The case is considered to be important because it could affect the government’s ability to crack down on health care fraud.
Lawsuits brought by whistleblowers allege the two supermarket chains billed the two government programs at artificially high rates, while charging most paying customers significantly lower prices under discount schemes. Federal law mandates that pharmacies bill the programs at the typical prices they actually make customers pay. The whistleblowers claim the chains knew they were overcharging the government and covered up their pricing policies.
The companies claim they shouldn’t be held liable because they acted in an objectively reasonable manner and didn’t knowingly commit fraud.
The cases involve the federal False Claims Act, sometimes called the Lincoln Law, which was enacted in 1863 to deal with defense contractor fraud during the Civil War. The act currently provides that anyone who knowingly files false claims with the government is liable for treble damages plus a $2,000 penalty for each false claim linked to inflation. The act allows the government to go after perpetrators and for private citizens to sue those who defraud the government on behalf of the government in what are known as qui tam suits.
Whistleblowers Tracy Schutte and Michael Yarberry claim in their petition that SuperValu knew “its reporting was problematic” and failed to report discounted prices, “charging the government ... higher prices.”
In the Safeway case, whistleblower Thomas Proctor said in his petition that “despite ample warning” the company “did not report its discounted prices” to the government and “this allowed Safeway to offer discounts to price-sensitive consumers without sacrificing lucrative reimbursements from the government.” One expert pegged the overbilling at $127 million.
Although the Chicago-based U.S. Court of Appeals for the 7th Circuit found SuperValu and Safeway had overbilled the government, it held that their billing processes were consistent with an “objectively reasonable” interpretation of the law, regardless of their intentions.
The DOJ encouraged the Supreme Court to accept the case, arguing the 7th Circuit rulings ran afoul of the purpose of the False Claims Act.
Counsel for SuperValu and Safeway, John Caviness O’Quinn of Kirkland and Ellis LLP, and counsel for the whistleblowers, Tejinder Singh of Sparacino PLLC didn’t respond by press time to a request from The Epoch Times for comment.
But Singh told Reuters his side was “glad the court took up this important issue.”
Justice Department officials also didn’t respond by press time to a request for comment.
