United States District Court, M.D. Florida, Tampa Division
CHARLENE EDWARDS HONEYWELL UNITED STATES DISTRICT JUDGE
matter comes before the Court on Defendants Robusto
Enterprises, LLC, Eduardo Lopez, Great White Shark
Opportunity Fund, L.P., and Great White Shark Opportunity
Management Fund, LLC's Motion to Dismiss and Incorporated
Memorandum (“Shark Defendants' Motion to
Dismiss”) (Doc. 108), C.V. McDowell Entities'
Motion to Dismiss and Incorporated Memorandum of Law
(“C.V. McDowell Entities' Motion to Dismiss”)
(Doc. 110), Defendants Jack L. Stapleton and Jack H.
Stapleton's Motion to Dismiss and Incorporated Memorandum
of Law (“Stapleton Defendants' Motion to
Dismiss”) (Doc. 112), Defendant Brad Long's Motion
to Dismiss and Incorporated Memorandum of Law (Doc. 127),
Plaintiff-Relator's Consolidated Opposition Brief in
Response to All Defendants' Motions to Dismiss (Doc.
135), and Plaintiff United States' Consolidated Response
to Defendants' Motions to Dismiss Complaint in Partial
Intervention (Doc. 136). This action was filed as a qui
tam suit by Relator Dwayne Thornton, who alleges that
Defendants violated the False Claims Act, 31 U.S.C.
§§ 3729, et seq. (“FCA”) by
engaging in a scheme for impermissible kickbacks in obtaining
and filling prescriptions for compound pharmaceuticals whose
cost was reimbursed by government healthcare programs. Doc.
75. The Relator alleged four counts under the FCA. The United
States filed a Complaint in Partial Intervention, in which it
named only some Defendants, alleged one count for violation
of the FCA, and alleged two common law counts, including one
for unjust enrichment and a second for payment by mistake.
move to dismiss the claims in Relator's Second Amended
Complaint that survived the Government's intervention, as
well as the claims raised by the Government in its Complaint
in Partial Intervention. Docs. 110, 112, 135. A hearing was
held on the motions on May 31, 2019. The Court, having
considered the motions and being fully advised in the
premises will grant the Shark Defendants' Motion to
Dismiss, grant-in-part and deny-in-part the C.V. McDowell
Entities' Motion to Dismiss, and grant-in-part and
deny-in-part the Stapleton Defendants' Motion to dismiss.
The Schemes Alleged in Relator's Second Amended
alleges that the twenty-two Defendants knowingly submitted,
or caused to be submitted claims to Medicare, Tricare, and
other government programs to pay for compound pharmaceutical
products, which were false because the claims were for
prescriptions generated through kickbacks and illegal
marketing practices, many of which were not wanted by the
patients or medically necessary. Doc. 75. As part of this
scheme, Relator alleges violations of the Anti-Kickback
Statute, 42 U.S.C. § 1320a-7b(b) (1990).
Relator served as the Vice President of Pharmacy Operations,
and as Director of Operations/Pharmacy Services for
Defendants Soothe Pharmacy, Inc., and other Defendants that
used the name “Soothe”, including National
Compounding Company, Inc.; Soothe Compounding Pharmacy;
Soothe Enterprises, LLC; Soothe Personalized Nutrition, LLC;
Soothe Nutrition and Supplements; Fort Myers Beach Pharmacy,
LLC; Soothe Personalized Health & Nutrition; Soothe
Pharmacy; Fort Myers Beach Pharmacy Holdings, LLC; and Soothe
Personalized Rx (the “Soothe Entities” or
“Soothe Defendants”). Id. ¶¶
6, 13-20. Relator's tenure with the companies lasted from
June 2014 until April 2015 and during most of that time,
Relator reported to Defendant Brad Long. Id. ¶
6. Relator classifies the “Soothe Defendants” and
Long as the “pharmacy defendants.” Defendants
C.V. McDowell Medical, Inc.; C.V. McDowell, LLC; and McDowell
Companies, Inc. (the “McDowell Defendants”) are
companies that generate prescriptions for compound
pharmaceutical products, which they then sell on a commission
basis to pharmacies to fill orders. Id. ¶¶
25-27. Defendant Jack L. Stapleton is the registered agent,
owner, and managing member of C.V. McDowell Medical, Inc., is
the managing member of C.V. McDowell, LLC, and is the
registered agent and officer/director of McDowell Companies,
Inc. Id. ¶ 28. Defendant Jack H. Stapleton is
an authorized member of C.V. McDowell, LLC. Id.
Robusto Enterprises, LLC (“Robusto”) also
generates prescriptions for compound pharmaceutical products,
which it sells on a commission basis to pharmacies to fill
orders. Id. ¶ 31. Robusto is managed by David
Chessler (who is not a party to this case), who also manages
Defendants Great White Shark Opportunity Fund Management,
L.P, and Great White Shark Opportunity Fund Management, LLC
(the “Great White Defendants”), which are also
companies that generate prescriptions for compound
pharmaceutical products that are sold on a commission basis
to pharmacies to fill orders. Id. ¶¶
31-33. Defendant Eduardo “Eddie” Lopez is also a
manager of Robusto, and held himself out as a representative
of the “Great White Shark Opportunity Fund” when
communicating with the Soothe Defendants and working to
generate prescriptions for compound pharmaceutical products
which were sold on a commission basis to pharmacies to fill
orders. Id. ¶ 34. Relator classifies the
McDowell Defendants, the Stapletons, Robusto, the Great White
Defendants, and Lopez as the “representative
alleges that the representative groups work on commission and
obtain a percentage of any prescription order for compound
pharmaceutical products, which may be worth thousands of
dollars. Id. ¶¶ 43, 45. Relator explains
that the Anti-Kickback Statute prevents the representative
groups from providing business to pharmacies through a
commission structure, but that representative groups and the
pharmacy defendants are doing so in violation of the
Anti-Kickback Statute. Id. ¶ 55. Relator
alleges that the representative groups would obtain
prescriptions through several marketing efforts, including
through call lists of people known to suffer from painful
conditions, and seek to obtain such individuals' consent
to obtain a prescription from a doctor for various
medications. Id. ¶¶ 47-48.
the representative groups would advertise these medications
as being free of charge, despite the fact that a co-payment
is required, and threaten to discontinue providing
prescriptions to any pharmacy that attempted to collect
co-payments. Id. ¶¶ 50-51, 54, 77-78. The
pharmacies, therefore, would refill prescriptions even if
patients did not make co-payments. Id. ¶ 79.
Relator alleges that the knowing failure to collect a
co-payment is an improper inducement to the patient to
purchase the product. Id. ¶ 80.
further alleges that the representative groups are violating
the FCA and Anti-Kickback Statute by having doctor's
offices fax prescriptions to the representative groups, who
then would forward the prescription to pharmacies in order to
ensure the representative groups obtained a share of the
value of the prescription. Id. ¶ 57. The
pharmacy defendants would then fill the prescriptions en
masse. Id. ¶ 64. Additionally, pharmacies would
transfer prescriptions from one pharmacy to another in
exchange for a fee or percentage of the bill to a government
program. Id. ¶ 72. Relator alleges that the
representative groups and pharmacies would generate and fill
prescriptions without medical necessity or documentation of
medical necessity. Id. The Relator alleges that this
scheme involves receiving or offering remuneration in
violation of the Anti-Kickback Statute. Id.
also alleges that the representative groups do not obtain
separate documentation for re-fills being requested or
authorized. Id. ¶ 95. He alleges that the
Robusto Enterprises Defendants would use a form with a box
for refills that could be checked by anyone, making it
impossible to be sure that the box was checked by an
appropriate provider. Id. ¶ 96. Additionally,
Relator alleges that the pharmacy defendants and
representative groups did not bother to determine whether
patients actually needed the medicine and did not require
additional documentation to be sure patients needed refills.
Id. ¶ 103. Through this scheme, the
representative groups worked with the pharmacy defendants to
maximize revenue as part of a fraudulent scheme to knowingly
submit or cause to be submitted false claims to the United
States. Id. ¶ 105.
contends that he analyzed the Soothe Defendants' billing
over a period of a year, and found that Flurbiprofen and
Fluticasone were used as ingredients to drive up the costs of
compounds with no medical reason. Id. at 118-20.
Creams using these ingredients are expensive and billed to
the patients' insurance, and most of the claims were paid
for by TRICARE, a government healthcare program. Id.
¶¶ 127-28. When Relator raised this issue during
his tenure with the Soothe Defendants, “he was told
that if the doctor signs the prescription and it isn't
hurting anyone, the government will not find out what
happened.” Id. ¶ 129. Indeed, Relator
alleges that the amount of Fluticasone being used in
prescriptions was unsafe and above recommended levels, but
Defendant Brad Long contended that it was safe and effective.
Id. ¶¶ 130-131. Relator attempted to have
the Soothe Defendants lower the amount of Fluticasone in some
formulas, but this alienated representative groups, and Brad
Long “was able to get Soothe to continue to use
Fluticasone in amounts that exceeded the manufacturers
recommendations.” Id. ¶ 132.
included a “representative chart” in the Second
Amended Complaint that shows examples of false claims
submitted to the government through billing of prescriptions
generated by representative groups to TRICARE. Id.
¶¶ 135-36. The chart shows: (1) the representative
group that generated the prescription; (2) the date the
prescription was dispensed and billed to TRICARE; (3) the
alias of the patient prescribed; (4) the quantity of the drug
prescribed; (5) the drug prescribed; (6) the total amount
billed to TRICARE; (7) the cost for the prescription; and (8)
the percent of profit from the prescription. Id.
Although in explaining the chart, Relator indicates that the
amounts were billed to TRICARE, Relator then states that the
representative groups “knowingly caused to be submitted
the representative examples of false claims to TRICARE or
other Government insurance programs, and they also knowingly
caused to be submitted other similar false claims to TRICARE
or other Government insurance programs through Soothe and
other pharmacies.” Id. ¶ 137.
indicates that he tried to reform the practices while he was
employed by the Soothe Defendants. Id. ¶ 141.
For example, Relator showed Defendants Long and DeStefano
examples of fraud and false claims, many of which involved
patient complaints. Id. ¶ 143. One such
complaint was demonstrated in e-mails between C.V. McDowell
and Long, in which there was a discussion of patient
complaints about not wanting, needing, or requesting the
medications. Id. ¶ 144. Another patient
complained on September 26, 2014, that C.V. McDowell would
not stop calling her about a prescription refill that she did
not want for a wound she did not have. Id. ¶
145. Relator e-mailed C.V. McDowell (including Defendant Jack
L. Stapleton) regarding wrongful prescriptions, and Stapleton
responded to Relator that due to internal changes, increased
restrictions, and filters implemented for Soothe, Relator
would see a decline in such complaints. Id. ¶
148. Relator continued to receive complaints, including that
a complaint that the physician had not actually signed a
prescription. Id. ¶ 149.
also details a patient study that C.V. McDowell wanted Soothe
to participate in that would generate many prescriptions and
for which patients would have free or low cost co-pays.
Id. ¶ 153. The Soothe Defendants declined to
participate in the study because they were at risk of losing
a major contract because patients were contacting their
insurance companies (the Second Amended Complaint does not
indicate what patients said to their insurance companies).
Id. ¶ 155. Relator spoke with the Stapleton
Defendants and C.V. McDowell on a phone call and advised them
that their practices were illegal, and one of the Stapleton
Defendants indicated that any violations were not serious.
Id. ¶ 156.
Relator's Second Amended Complaint contains four counts
based on these alleged facts. Count I alleges violations of
31 U.S.C. § 3729(a)(1)(A) for submitting and/or causing
the submission of False Claims to the United States.
Id. ¶¶ 166-176. In Count I, Relator
alleges that Defendants submitted false claims, or caused
them to be submitted, by illegally transferring prescriptions
en masse in exchange for a percentage of the transferred
prescription, waiver, reduction, or arrangement for reduction
of co-payments owed by patients, which violated the
Anti-Kickback Statute and government regulations.
Id. ¶ 169. Relator alleges that Defendants
misrepresented to physicians the need for the prescriptions,
and misrepresented to patients the co-payment obligations.
Id. ¶ 171. As part of this scheme, Defendants
routinely used pre-printed prescription pads to further their
goals, which included using them to create automatic refills
of prescriptions. Id. ¶ 172. Defendants also
promoted specific prescriptions solely to increase the cost
of those prescriptions. Id. Relator also alleges
that the Defendants who generated prescriptions (the
Representative Groups) routinely obtained commissions for
prescriptions that they arranged to be filled, creating an
illegal kickback scheme. Id. ¶ 170. The
McDowell Defendants, Robusto, and Great White Defendants also
sent prescriptions to doctors' offices, which were then
returned to these Defendants, who then sent them to the
pharmacies to fill. Id. ¶ 173. The purpose of
this procedure was to ensure these Defendants obtained
commissions on the sale as part of their kickback
arrangements that caused the submission of false claims to
the Government by the Soothe Defendants and other pharmacies.
Id. Additionally, Relator alleges that the Soothe
Defendants did not maintain efforts to ensure a prescribing
doctor comported with the laws of the state in which the
prescription was filled, despite acting as a national
provider of these pharmaceuticals. Id. ¶ 174.
II alleges violations of 31 U.S.C. § 3729(a)(1)(B) for
using false statements. Id. ¶¶ 177-181. In
Count II, Relator contends that to further their activities,
Defendants created false records in the form of prescriptions
material to supporting their false claims. Id.
¶¶ 178-79. Count III alleges violations of 31
U.S.C. § 3729(a)(1)(C) for conspiring to submit false
claims. Id. ¶¶ 182-85. Finally, Count IV
alleges a reverse FCA claim under 31 U.S.C. §
3729(a)(1)(G). Id. ¶¶ 186-92.
The United States' Complaint in Partial
United States filed a Complaint in Partial Intervention
against Defendants Brad Long; Frank DeStefano; CV McDowell,
LLC; J&J Tel Marketing, LLC; Jack L. Stapleton; and Jack
H. Stapleton (“Government's Complaint”). Doc.
104. Either Long, DeStefano, or both are officers or owners
of the various Soothe Defendants. Doc. 75 ¶¶ 13-22.
The United States has since settled its claims against Frank
DeStefano. Doc. 154. Under the FCA, once the
Government intervenes, the relator has “the right to
continue as a party to the action, ” subject to certain
limitations, but the Government has “the primary
responsibility for prosecuting the action . . . .” 31
U.S.C. § 3730(c)(1). Accordingly, the Relator's
claims are superseded by the Government's Complaint to
the extent that it intervened, and Relator's Second
Amended Complaint survives only with respect to
non-intervened claims. United States v. Pub. Warehousing
Co. K.S.C., 242 F.Supp.3d 1351, 1357 (N.D.Ga. 2017);
see also Relator's Consolidated Response to the
Motions to Dismiss at 4-5 (“Relator's kickback
claims against the Soothe Defendants and CV McDowell
Defendants that allege false claims based on those same
illegal commission arrangements are superseded by the
Government alleges that Long and DeStefano owned and were
actively involved in managing and directing the daily
operations at Soothe Compounding Pharmacy (“Soothe
Compounding”), and that the Stapleton Defendants were
actively involved in managing and directing operations of
C.V. McDowell, LLC (“McDowell LLC”) and J&J
Tel Marketing, LLC (“J&J”), which are
affiliate companies (collectively, “McDowell
Companies”). Doc. 104 ¶¶ 7-8, 10, 12-13. The
Government further alleges that the McDowell Companies
utilized telemarketing to market topical compounded
prescription creams and other pharmaceutical products
directly to patients throughout the country, including to
TRICARE beneficiaries. Id. ¶¶ 9-10.
Government alleges a scheme under which Soothe Compounding
entered into agreements with independent third-party
marketers who were paid kickbacks to generate compounded drug
prescriptions, which they were to arrange to be referred to
Soothe, which would seek payment from the patient's
insurance, including TRICARE. Id. ¶ 34. The
marketers included McDowell LLC. Id. Long and
DeStefano negotiated the agreements and oversaw the
March 2014, Soothe Compounding entered into an Independent
Contractor Agreement (“Agreement”) with McDowell
LLC. Id. ¶ 35. Long, DeStefano, and the
Stapleton Defendants were involved in negotiating the
arrangement. Id. ¶ 36. In the Agreement, the
parties agreed to split revenue from prescriptions that
McDowell LLC solicited and referred to Soothe Compounding.
Id. ¶ 35. Specifically, Soothe Compounding
would pay McDowell LLC fifty percent of the gross sales
amount of all Soothe Compounding products ordered, purchased,
and prescribed by physicians. Id.
and DeStefano also both negotiated other agreements. Among
those agreements was a commission agreement between Soothe
Enterprises, LLC, an entity related to Soothe Compounding,
and Robusto Enterprises, under which Robusto Enterprises
would receive seventy-five percent of the amount collected on
claims attributed to Robusto Enterprises. Id. ¶
37. Long and DeStefano also obtained an agreement between
Soothe Compounding and the owner of another entity, Top Tier
Medical, in which Soothe Compounding agreed to split all
revenue from prescriptions that the owner was responsible for
bringing to Soothe. Id. ¶ 39. The agreements
with these entities explicitly indicated that their
relationship to Soothe Compounding was as independent
contractors, and no employment relationship existed.
Id. ¶ 43 In essence, the marketing agreements
were arrangements under which Long and DeStefano agreed to
pay third parties for the referral of prescriptions to Soothe
Compounding. Id. ¶¶ 44-45. For example, a
Robusto Enterprises principal e-mailed Long and DeStefano on
June 13, 2014, when the agreement was being drafted, stating
“[o]our intentions are to start flowing business your
way starting this Monday.” Id. ¶ 45.
Another Robusto Enterprises principal e-mailed Long and
DeStefano about a person he believed could bring in 200-250
prescriptions in July, which Long stated “sound[ed]
communications indicated marketers shifted business they
generated to and from Soothe. Id. ¶ 48. An
e-mail from Soothe Compounding to McDowell LLC indicated that
various migraine prescriptions could not be filled because
the strength of a certain ingredient was absent from the
prescriptions, and Jack H. Stapleton advised Soothe
Compounding to disregard migraine patients sent to Soothe
from McDowell LLC because they would be processed by another
pharmacy. Id. The Government contends this is
demonstrative of the role that marketers played in
determining where prescriptions were referred, and also show
that the marketers were third-party referral sources, and not
employees of Soothe Compounding. Id. ¶ 49.
Government alleges that the marketing companies would seek to
obtain and refer prescriptions that would generate a high
payment to the pharmacy and, therefore, a larger kickback for
the marketer, regardless of whether a specific formulation
was medically necessary. Id. ¶ 51. For example,
DeStefano, on behalf of one of the Stapleton Defendants,
asked Soothe Compounding employees about a formulation for a
supplement compound, and the employees responded to
DeStefano, Long, and Stapleton that they analyzed the formula
and that they found one ingredient at the highest average
wholesale price. Id. ¶ 52. Additionally,
DeStefano wrote to Soothe employees that one of the Stapleton
Defendants indicated an interest in expanding into wound and
scar formulas, noted that wounds could be challenging for
adjudications, and asked the employees to help the Stapleton
Defendant out as much as they could in researching formulas.
Id. ¶ 53. Long followed up on the e-mail by
asking what formula would be recommended, and asking for
information regarding the cost, average wholesale price, and
adjudicated amount. Id. Along these lines, a couple
weeks later, Jack H. Stapleton asked a Soothe Compounding
official which wound creams had the highest payout, and the
Soothe official provided information on the highest average
wholesale price payout for all of their formulations.
Id. ¶ 54.
Stapleton also contacted Soothe Compounding officials
regarding a migraine formula that McDowell LLC learned had a
higher payout. Id. ¶ 55. Jack H. Stapleton
asked for Soothe Compounding's approval of the formula so
that McDowell LLC could send Soothe Compounding migraine
prescriptions with that formula. Id. Soothe
Compounding responded that the formula was approved, but that
one change would decrease reimbursement by a dollar or so.
Id. Jack H. Stapleton also contacted Soothe
Compounding to inquire whether a general wellness/metabolic
formulation used by another client would have a higher
average wholesale price than the one provided by Soothe
Compounding. Id. ¶ 56.
Lopez of Robusto Enterprises e-mailed Long, DeStefano, and
another Soothe Compounding official a copy of a prescription
pad that reflected a prescription formula, and asked their
thoughts on the formulations and how they would be
reimbursed. Id. ¶ 57. Lopez specifically asked
how much pain and scar prescriptions “would come back
at for a TriCare 240gm.” Id.
method of increasing revenue was to generate multiple
prescriptions per patient. Id. ¶ 59. McDowell
LLC instructed its telemarketing sales agents to ask
prospective patients about their interest in topical creams
for a number of different common ailments, such as scarring,
dry itchy skin, pain, and severe headaches. Id.
¶ 60. Similarly, Lopez e-mailed Long and DeStefano that
maximizing overall reimbursement per patient would hopefully
result in higher per patient revenue with little to no
difference in the time it would take to bill. Id.
kickback schemes routinely resulted in the referral of
unwanted or unnecessary prescriptions for compound drugs.
Id. ¶ 62. Patients referred by McDowell LLC
frequently contacted the pharmacy to complain that they did
not want or need the medications they had been sent by Soothe
Compounding. Id. Long and DeStefano were aware of
these complaints, but benefitted from the profits Soothe
Compounding made from the kickback schemes. Id.
Government further alleges that Soothe Compounding submitted
claims for TRICARE reimbursement for the prescriptions for
compound drugs referred from McDowell LLC to Soothe
Compounding. Id. ¶ 64. The Government provided
several sample claims (using aliases for the patients)
submitted by Soothe Compounding to TRICARE for prescriptions
referred to Soothe by McDowell LLC, and for which McDowell
LLC received a kickback:
1. Patient A was a patient referred to Sooth by CV McDowell.
Soothe filled prescription 114924 for a compounded medication
for Patient A on or about June 20, 2014 and submitted a claim
to TRICARE. TRICARE paid Soothe $5, 552.88 for the
2. Patient B was a patient referred to Soothe by CV McDowell.
Soothe filled prescription 116331 for a compounded medication
for Patient B on or about June 25, 2014 and submitted a claim
to TRICARE. TRICARE paid Soothe $9, 001.33 for the
3. On July 2, 2014, Soothe sent a report to CV McDowell
detailing prescriptions for which CV McDowell was credited
that were filled between June 15, 2014 and July 1, 2014. That
report included prescription 114924 for Patient A, totaling
$5, 552.88, and prescription 116331 for Patient B, totaling
$9, 001.33. Soothe reported that prescriptions credited to CV
McDowell during this period (including the prescriptions for
Patient A and Patient B) had generated a total of $384,
026.65. On or about that same day, consistent with
Soothe's agreement with CV McDowell, Soothe paid CV
McDowell 50% of that amount: $192, 013.
4. Patient C was a patient referred to Soothe by CV McDowell.
Soothe filled prescription 131979 for a compounded medication
for Patient C on or about October 1, 2014 and submitted a
claim to TRICARE. TRICARE paid Soothe $9, 892.64 for the
prescription. On October 15, 2014, Soothe emailed a report to
CV McDowell (copying both Long and DeStefano) detailing
prescriptions for which CV McDowell was credited that were
filled between October 1, 2014 and October 14, 2014. That
report included prescription 131979 for Patient C, totaling
$9, 892.64. Soothe reported that prescriptions credited to CV
McDowell during this period (including the prescription for
Patient C) had generated a total of $581, 628.59. On or about
October 16, 2014, consistent with Soothe's agreement with
CV McDowell, Soothe paid CV McDowell (through a CV McDowell
affiliate called CCV Enterprises LLC) 50% of that amount:
Id. ¶ 66. The Government also provided a chart
of payments totaling more than $4.4 million made by Soothe
Compounding to McDowell LLC. Id. ¶ 67. The
chart includes the date of the payments and the amount of the
payments. Id. The Government's Complaint also
provides representative patients and a chart of payouts from
Soothe Compounding to Robusto Enterprises and to Top Tier
Medical, which included claims submitted by Soothe
Compounding to TRICARE. Id. ¶¶ 68-75.
Government's Complaint further alleges that McDowell LLC
had similar kickback schemes with other pharmacies, including
World Health Industries Holding Company, Inc. and Opus Rx,
LLC. Id. ¶¶ 77-82. With respect to Opus
Rx, LLC, the Government alleges that an agreement also
existed between that pharmacy and J&J. Id.
¶ 80. The Government includes in its allegations various
terms of the agreements with these pharmacies, as well as
prescriptions filled for specific TRICARE beneficiaries and
the amount TRICARE paid for the prescriptions, which McDowell
LLC or J&J were credited with obtaining for the
pharmacies. Id. ¶¶ 77-79, 82.
the Government provided allegations regarding McDowell
LLC's practices. Specifically, the Government alleges
that McDowell LLC's training materials instructed sales
agents to “sell the patient on the Topical
Creams” and not to “give up” during sales
calls. Id. ¶ 83. On these calls, the sales
agents would obtain information about patients' insurance
and their primary care physicians. Id. ¶ 84.
McDowell LLC would then seek to arrange for the patients'
doctors to authorize prescriptions for these products which
the patients purportedly agreed to accept. Id.
¶ 85. The prescriptions were then directed back to
McDowell LLC, which would determine to which pharmacy it
would send the prescription. Id. This method allowed
McDowell LLC to direct prescriptions to pharmacies that
agreed to pay kickbacks to McDowell LLC. Id.
Government alleges that McDowell LLC would also use
“telemedicine” providers, who would consult with
and prescribe compound medications for patients McDowell LLC
solicited. Id. ¶ 86. The
“telemedicine” providers did not have a
relationship with the patients and did not physically examine
them. Id. The providers would return the
prescriptions to McDowell LLC, or send them to a pharmacy
chosen by McDowell LLC, which ensured McDowell LLC would
receive a kickback. Id.
tactics by McDowell LLC resulted in the referral of unwanted
prescriptions and the pharmacies that filled the
prescriptions frequently received complaints from the
patients that they did not want or need the medications, or
that they were advised when they agreed to accept the
medications that they would not have to pay anything.
Id. ¶ 87.
LLC was advised of these complaints. Id.
¶¶ 88-93. For example, a pharmacy with which
McDowell LLC had a kickback arrangement advised the Stapleton
Defendants on April 11, 2014, that almost every patient for
whom they filled prescriptions called back stating that they
did not know what the prescription was or that they did not
have issues related to the prescription. Id. ¶
88. Similarly, Soothe Compounding contacted McDowell LLC on
July 15, 2014, stating that a patient claimed he had no wound
or need for the product. Id. ¶ 89. The
Government provides various other specific examples of
complaints being communicated to McDowell LLC and contends
that the complaints show that patients were misled or coaxed
into accepting medications that they did not want or need.
Id. ¶¶ 90-93.
Government alleges that Long and DeStefano were aware of the
restrictions of the Anti-Kickback Statute, because they
received training in it at previous jobs, and because a
representative of Professional Compounding Centers of America
(“PCCA”) warned them that a pharmacy's
production-based payments to non-employee marketers would
violate the Anti-Kickback Statute if those marketers
generated business for federal health care program
beneficiaries. Id. ¶ 98. In fact, the PCCA
representative e-mailed Long a document on April 17, 2013,
discussing the Anti-Kickback Statute's restrictions on
pharmacies paying commissions, bonuses, and other
production-based compensation to an independent contractor to
market or generate Medicare business. Id. ¶ 99.
The same document was subsequently provided to Long by an
acquaintance of his with the subject line “FYI: article
about paying 1099 employees.” Id. ¶ 101.
Government also alleges that McDowell LLC and J&J were
aware of the prohibitions under the Anti-Kickback Statute.
Id. ¶ 103. Specifically, the Government relies
on certain marketing agreements signed by Jack L. Stapleton
which state that McDowell LLC and J&J would provide
services in compliance with the federal anti-kickback laws,
specifically 42 U.S.C. § 1320a-7b, and would not pay
remuneration to any person or entity in return for referrals
or the writing of prescriptions. Id. ¶ 103.
Additionally, on March 13, 2014, the chief executive officer
of a compounding pharmacy to which McDowell LLC had been
sending prescriptions sent a letter to Jack L. Stapleton
regarding the termination of the pharmacy's marketing
agreement with McDowell LLC. Id. ¶ 105. The
pharmacy indicated that McDowell LLC failed to comply with
applicable federal and state regulations as required by the
agreement, that a large portion of the prescriptions referred
by McDowell LLC were problematic and troubling, and that many
patients and providers indicated that the prescriptions
referred were never authorized. Id. The chief
executive officer rejected McDowell's claim of
entitlement to continuing revenue compensation, stating that
this was prohibited by anti-kickback laws. Id.
Similarly, another pharmacy notified McDowell LLC on January
30, 2015, that it was modifying marketing agreements to
ensure compliance with federal and state anti-kickback
statutes and regulations. Id. ¶ 106.
Government's Complaint contains three causes of action.
Count I is against all Defendants named in the
Government's Complaint and alleges violation of section
31 U.S.C. § 3729(a)(1)(A). Doc. 104 ¶¶
111-113. The Government alleges that Defendants knowingly
caused to be made or presented claims for payment for
compounded drugs for TRICARE patients that were tainted by
illegal kickback arrangements in violation of the FCA.
Id. ¶ 112. Count II is against all Defendants
and alleges a common law equitable cause of action to recover
money paid by mistake by TRICARE for compounded drugs that
were tainted by the kickback arrangements of which Defendants
were a part. Id. ¶¶ 114-16. Count III is
also against all Defendants and alleges a common law claim
for unjust enrichment, based on the contention that
Defendants were unjustly enriched at the expense of the
United States by virtue of their kickback scheme.
Id. ¶¶ 117-19.
survive a motion to dismiss, a pleading must include a
“short and plain statement showing that the pleader is
entitled to relief.” Ashcroft v. Iqbal, 556
U.S. 662, 677-78 (2009) (quoting Fed.R.Civ.P. 8(a)(2)).
Labels, conclusions and formulaic recitations of the elements
of a cause of action are not sufficient. Id. at 678
(citing Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007)). Mere naked assertions, too, are not sufficient.
Id. A complaint must contain sufficient factual
matter, which, if accepted as true, would “state a
claim to relief that is plausible on its face.”
Id. (quoting Twombly, 550 U.S. at 570).
“A claim has 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.” Id. (citation omitted).
The court, however, is not bound to accept as true a legal
conclusion stated as a “factual allegation” in
the complaint. Id. Therefore, “only a
complaint that states a plausible claim for relief survives a
motion to dismiss.” Id. (citation omitted).
addition to satisfying the general pleading requirements
articulated in Twombly and Iqbal, an FCA
complaint must satisfy the heightened pleading requirements
of Fed.R.Civ.P. 9(b), which places more stringent pleading
requirements on cases alleging fraud. United States ex
rel. Clausen v. Lab. Corp. of Am., Inc., 290 F.3d 1301
(11th Cir. 2002). “[U]nder Rule 9(b) allegations of
fraud must include facts as to time, place, and substance of
the defendant's alleged fraud.” Id. at
1308 (citation and internal quotations omitted). The Rule
9(b) particularity requirement for fraud allegations exists
to put defendants on notice as to the exact misconduct with
which they are charged and to protect defendants against
spurious charges. Ziemba v. Cascade Int'l, Inc.,
256 F.3d 1194, 1202 (11th Cir. 2001). The failure to satisfy
Rule 9(b)'s pleading requirements amounts to a failure to
state a claim under Rule 12(b)(6) and requires dismissal of
the complaint. See, e.g., Corsello v.
Lincare, Inc., 428 F.3d 1008, 1012 (11th Cir. 2005).
The False Claims Act
was enacted to recover money fraudulently taken from the
government. United States ex rel. Butler v. Magellan
Health Servs., Inc., 74 F.Supp.2d 1201, 1204 (M.D. Fla.
1999) (citing United States ex rel. Marcus v. Hess,
37 U.S. 537, 551 (1943)). The Act allows a private party to
bring a civil action (known as qui tam) alleging
fraud upon the government, and that party may share in the
proceeds should he or she prevail. Id. at 1205-06.
The qui tam action may be brought against any person
(A) knowingly presents, or causes to be presented, a false or
fraudulent claim for payment or approval;
(B) knowingly makes, uses, or causes to be made or used, a
false record or statement material to a false ...