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Thornton v. National Compounding Co., Inc.

United States District Court, M.D. Florida, Tampa Division

July 1, 2019




         This 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), [1] 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. Doc. 104.

         Defendants 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.

         I. BACKGROUND[2]

         A. The Schemes Alleged in Relator's Second Amended Complaint

         Plaintiff 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).

         The 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”)[3]. 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. ¶ 29.

         Defendant 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 groups.”

         Relator 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.

         Additionally, 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.

         Relator 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. ¶¶ 73-74.

         Relator 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.

         Relator 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.

         Relator 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.

         Relator 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.

         Relator 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.

         The 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.

         Count 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.

         C. The United States' Complaint in Partial Intervention

         The 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.[4] 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's Complaint.”).

         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.

         The 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 relationships. Id.

         In 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.

         Long 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] good.” Id.

         Various 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.

         The 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.

         Jack H. 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.

         Likewise, 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.

         Another 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. ¶ 61.

         The 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.

         The 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 prescription.
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 prescription.
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: $290, 814.

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.

         The 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.

         Additionally, 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.

         The 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.

         These 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.

         McDowell 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.

         The 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.

         The 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.

         The 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.


         To 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).

         In 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).


         A. The False Claims Act

         The FCA 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 who:

(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 ...

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