Background
A. Samuel Enloe, a long-term-care pharmacy competitor, brought this qui tam action alleging that Heritage Operations Group and its affiliated pharmacy, Green Tree Pharmacy, violated the False Claims Act. He alleged that nurses at Heritage facilities dispensed Schedule II drugs from emergency narcotics kits after pharmacy hours without pharmacist approval, then submitted Medicare Part D claims for the drugs.
Enloe based his theory principally on Green Tree’s emergency-kit policy and its operating hours. He asserted that after-hours oral prescriptions left by voicemail were not received by a pharmacist before dispensing, and that some drugs were dispensed without prescriptions and later supported by backdated prescriptions. The district court dismissed the second amended complaint under Rule 9(b), along with Enloe’s Controlled Substances Act and unjust-enrichment claims. On appeal, Enloe challenged only dismissal of the FCA claims.
The Court’s Holding
The Seventh Circuit affirmed. The majority held that Enloe did not plead an FCA violation with the particularity Rule 9(b) requires. His theory depended on unsupported assumptions that defendants violated the Controlled Substances Act and necessarily submitted false Medicare claims, rather than concrete allegations of particular false claims or facts that necessarily led to that conclusion.
The court also held that Enloe failed to plead FCA materiality. Even assuming the alleged dispensing practices violated the CSA, he did not allege facts showing that the government actually attached weight to compliance with the asserted requirement in deciding whether to pay. Prior settlements involving pharmacies accused of dispensing drugs without any prescription did not establish materiality for the different conduct alleged here. Judge Jackson-Akiwumi concurred in the judgment solely because Enloe failed to plead materiality.
Key Takeaways
- An FCA relator need not produce an actual invoice at the pleading stage, but must allege concrete facts supporting the conclusion that false claims were presented to the government.
- Alleged noncompliance with uncertain regulatory guidance does not, without more, plausibly establish knowing falsity under the FCA.
- Materiality requires facts showing the government actually regards compliance as important to payment; merely identifying a payment condition is insufficient.
Why It Matters
The decision reinforces that outsider relators cannot rely on a competitor’s internal policy and generalized inferences to plead a Medicare fraud scheme. They must investigate and allege particularized facts connecting the alleged underlying misconduct to false claims and to the government’s payment decisions.
The concurrence would have treated the prescription regulation and fraud allegations more favorably, but agreed that the complaint failed on the FCA’s rigorous materiality requirement.