MEMORANDUM OPINION

Rufe, J.

Relators Lena Sturgeon, Anthony Ferrante, Anthony Sciole, and Nathan Niles bring this qui tam action against PharMerica Corporation alleging violations of the federal False Claims Act1 and the false claims statutes of twenty-six states.2 Relators allege that PharMerica, a long-term care pharmacy, submitted false claims for government reimbursement for prescriptions it illegally altered without physician consent. Relator Sturgeon also alleges that PharMerica retaliated against her after she attempted to bring to its attention alleged instances of fraudulent activity. The state and federal governments declined to intervene and PharMerica has moved to dismiss the Amended Complaint.

I. BACKGROUND3

A. PharMerica Is a Long-Term Care Pharmacy

PharMerica is the second largest institutional pharmacy in the United States.4 It fills prescription orders only for nursing homes and other long-term care facilities and is not open to the general public.5

Nursing home physicians submit prescriptions to PharMerica electronically through a "widely-used nursing home platform" called PointClickCare.6 PharMerica also uses its own "proprietary medicine dispensing system known as the LTC400" to fill prescriptions received through PointClickCare.7 Prescription data transmitted via PointClickCare is not migrated automatically to the LTC400 to create an order for filling a prescription. Instead, when a prescription is received through the PointClickCare system, a pharmacy technician or data entry clerk at PharMerica manually inputs the prescription information into the LTC400.8

B. Overview of Medicare Part D

"Medicare is a federally funded and administered health insurance program for certain groups, primarily elderly and disabled persons."9 "The Department of Health and Human Services (`HHS') administers the Medicare program through the Centers for Medicare and Medicaid Services (`CMS')."10 Relevant here are two components of the Medicare program: Part A, the hospital insurance benefits program,11 and Part D, the voluntary prescription drug benefit program.12

"Medicare Part D is based on a private market model, wherein Medicare contracts with private entities, known as Part D `sponsors,' to administer prescription drug plans."13 "Part D [p]lan sponsors subcontract with many entities to provide drugs to the Medicare Part D beneficiaries enrolled in their plans."14 PharMerica is one such subcontractor.15 Its contracts with Part D plan sponsors "require PharMerica to comply with applicable federal laws, regulations, and CMS instructions."16 This is also true of PharMerica's contracts under the analogous state Medicaid programs.17

PharMerica certifies its compliance with applicable laws and regulations each time it submits a claim for reimbursement. When a pharmacy like PharMerica "dispenses drugs to a Medicare beneficiary, it submits an electronic claim to the beneficiary's Part D plan and receives reimbursement from the plan sponsor for the costs not paid by the beneficiary."18 That claim submission must be accompanied by a certification of compliance with applicable laws and regulations,19 including compliance with the requirement that drugs be dispensed only pursuant to a valid prescription.20 This is also true of PharMerica's claims under the analogous state Medicaid programs.21 PharMerica also receives direct payments from nursing home facilities using Medicare Part A funds with analogous requirements.22

C. Relator Sturgeon's Investigation

Reliant Health Management Services is the owner and operator of more than twenty nursing homes in Pennsylvania.23 In June 2013, Reliant began using PharMerica as its institutional pharmacy.24 Soon after Reliant switched to PharMerica, it noticed that its "nursing home facilities experienced a significant increase in pharmacy costs ranging from $2.00-$3.00 per patient per day."25 Reliant complained.26 PharMerica's Senior Vice President for Sales and Marketing Mark Lindemoen asked Sturgeon, who by that time was working at PharMerica as its Executive Vice President, to review the issue.27

As she reviewed Reliant's complaint, Sturgeon began to notice "significant discrepancies" between prescription order data received via PointClickCare and prescription fill data in the LTC400.28 That is, it appeared to Sturgeon that on some occasions PharMerica had dispensed medications different from those prescribed. These discrepancies "consistently favored PharMerica's bottom line."29 Sturgeon brought her findings to Lindemoen, who "refused to acknowledge the problems" or investigate further.30 When Sturgeon raised the issue with him again after returning from a brief medical leave, Lindemoen "shut down the meeting and ordered Sturgeon to stop her investigation."31 Other senior-level management executives responded similarly.32

After Sturgeon reported her findings to management, "there was an unexplained and sudden diminution of Sturgeon's duties and responsibilities."33 Sturgeon was "removed from the Mid-Atlantic region sales and marketing strategies and development initiatives" and stripped of her authority to negotiate and terminate contracts and to review and approve capital expenditures and development projects and of her responsibility for "all customer relationships in Florida."34 This diminution in her job responsibilities was "retaliatory."35 Sturgeon resigned her position.36

After leaving PharMerica, Sturgeon began working as a consultant in the nursing home and pharmacy industries.37 Reliant retained her to audit its relationship with PharMerica.38 Relators Ferrante, Sciole, and Niles are corporate officers at Reliant and appear to have been involved in the audit.39 In conducting the audit, Sturgeon confirmed the discrepancies she had identified while employed at PharMerica and discovered the source of those discrepancies: an alleged scheme to alter prescriptions systematically so as to increase reimbursements.40

D. Alleged Prescription Alteration Scheme

Relators' audit revealed that PharMerica systematically altered prescriptions "and did so to enhance its profit margins and increase its rebates from manufacturers and suppliers."41 The use of both the PointClickCare system and the LTC400 made this possible in two ways. First, the system of manually entering prescription data received via PointClickCare allowed PharMerica to direct its clerks to alter the data intentionally.42 That is, in some instances, the data as originally entered in the LTC400 did not match the prescription data received via PointClickCare. Second, the LTC400 itself was programmed so that whenever an ordered drug was out of stock, the platform would prompt clerks to replace it with the most profitable alternative, even if the data was correctly transcribed.43 In either case, PharMerica did not comply with applicable laws and regulations requiring that pharmacists get the prescribing physician's consent before altering any essential element of a prescription.44

Relators allege that PharMerica illegally altered prescriptions in this manner for both controlled and non-controlled substances, sometimes altering the drug's dosage and other times altering its form (i.e., tablet vs. capsule) or the drug itself (i.e., brand name vs. generic).45 Specifically, Relators allege that their audit turned up at least 5,687 instances of PharMerica altering dosages without notice to the prescribing physician;46 10,540 instances of PharMerica altering drug forms without notice;47 and an unspecified number of instances of PharMerica dispensing a brand-name drug instead of the prescribed generic drug.48

E. Procedural Background

Relators filed this qui tam action in 2015. The case was voluntarily dismissed in 2018 after Relators' attorney informed them that the United States had declined to intervene, but Relators then moved for relief pursuant to Federal Rule of Civil Procedure 60(b), arguing that their counsel never informed them that he was filing a notice of dismissal.49 Indeed, when the notice of dismissal was filed, Relators were in the process of seeking replacement counsel, as their counsel would no longer represent them after the United States declined to intervene.50 The Court granted the motion and reopened the case.51

After the case was reopened, Relators filed the First Amended Complaint, which is the operative pleading here.52 PharMerica moved to dismiss the First Amended Complaint and requested judicial notice of a number of documents in support of its Motion to Dismiss.53 The Court held oral argument limited to three disputed issues related to the Motion to Dismiss.54

II. MOTION FOR JUDICIAL NOTICE

PharMerica requests judicial notice of a number of documents to support its motion to dismiss. A court may take judicial notice of facts that are not subject to reasonable dispute because they are either "generally known within the trial court's territorial jurisdiction" or "can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned."55 A court "must" take judicial notice if a party requests it and supplies the court with the necessary information.56

The Third Circuit has cautioned that taking judicial notice "should be done sparingly at the pleadings stage. Only in the clearest of cases should a district court reach outside the pleadings for facts necessary to resolve a case at that point."57 Courts will, however, take judicial notice of certain matters of public record on a motion to dismiss; examples of matters of public record include "Securities and Exchange Commission filings, court-filed documents, and Federal Drug Administration reports published on the FDA website."58

A. Materials from Prior Judicial Proceedings

Courts may take judicial notice of public records, including "publicly available records and transcripts from judicial proceedings."59 In particular, publicly available records from other judicial proceedings may be judicially noticed in the context of a motion to dismiss.60 Such records may only be judicially noticed to show "what was in the public realm at the time, not whether the contents of those documents are true."61 Thus, "on a motion to dismiss, [a court] may take judicial notice of another court's opinion—not for the truth of the facts recited therein, but for the existence of the opinion, which is not subject to reasonable dispute over its authenticity."62

PharMerica requests judicial notice of four filings from a prior False Claims Act case, United States ex rel. Denk v. PharMerica, which it argues precludes Relators' claims as discussed below.63 Those filings are: Relator Denk's original Complaint; Relator Denk's First Amended Complaint; the Government's Notice of Election to Intervene in Part and Decline to Intervene in Part; and the Government's Complaint. Copies of all four filings are included as exhibits to the Motion for Judicial Notice, and all are unsealed and publicly available. The Court can—in fact, it must—evaluate the content of these records in assessing whether the public disclosure bar applies.64 Judicial notice, however, extends only as far as recognizing what the parties in Denk pled and argued—in other words, what was publicly disclosed—and not to the truth of the judicially noticed records. Relators do not object to the Court taking notice of these documents for this purpose.65

PharMerica also requests judicial notice of four filings from Relator Sturgeon's prior employment action against PharMerica, which it argues preclude her retaliation claims here. Those filings are: the Complaint; the First Amended Complaint; the Verdict Slip; and the Judgment. Copies of all four filings are included as exhibits to the Motion for Judicial Notice, and all four are publicly available. The Court must consider these documents in determining whether Relator Sturgeon's retaliation claim is precluded by the jury verdict in her prior employment action.66 They may only be judicially noticed, however, to establish their existence, "and not for the truth of the facts asserted" in those filings.67 Relators do not object to the Court taking notice of these documents for this purpose.68 Accordingly, the Court will take judicial notice of these eight documents.

B. Administrative Reports

Courts may also take judicial notice of "records and reports of administrative bodies."69 PharMerica requests judicial notice of three documents in this category. Two are administrative guidance manuals issued by CMS.70 The third is a report on standard practices within the long-term care pharmacy industry, which appears to have been commissioned by CMS and prepared by a consultant, the Lewin Group.71

Relators argue that the Court should decline to take judicial notice of these reports because they are not authenticated.72 PharMerica responds that information found on government websites is considered authenticated, and that these three reports are reliable in that they are not subject to change at any time, like most websites, because they are either archived or contain a "change log that tracks all revisions."73

PharMerica is correct that information found on government websites is widely considered both self-authenticating and subject to judicial notice.74 Indeed, these CMS reports are not just information on a government website—they are published reports of a federal agency that happen to be available online.75 The question remains, however, whether to take judicial notice of these reports only for their existence, or also for the truth of their contents. PharMerica cites these three reports in its briefs to support factual assertions about the business model of the long-term care pharmacy industry and the regulatory environment in which long-term care pharmacies operate,76 based on which it argues that pharmacy fraud is inherently implausible because the pharmacy industry is so closely regulated.77

It would be one thing to rely on the CMS manuals as showing what was publicly known at a given time in order to prove, for example, that the defendants were not on notice that certain conduct was fraudulent.78 But PharMerica seeks to rely on them as substantive evidence that comprehensive regulations governing the pharmacy industry make pharmacy fraud categorically implausible. The Court declines to foreclose all proof on such a central question by looking outside the record at the motion-to-dismiss stage, so these materials will be judicially noticed only for their existence and not for their truth.

C. Materials from the PointClickCare Website

Courts may consider documents "`integral to or explicitly relied upon in the complaint' ... `without converting the motion [to dismiss] into one for summary judgment.'"79 Although generally courts avoid looking at evidence outside the complaint at the motion-to-dismiss stage, an exception can be made where a plaintiff would be "able to maintain a claim of fraud by extracting an isolated statement from a document and placing it in the complaint, even though if the statement were examined in the full context of the document, it would be clear that the statement was not fraudulent."80 In that case, fairness would require examining the whole document, even if the plaintiff did not attach it as an exhibit to the complaint. This narrow exception is limited, however, to cases where "the claims in the complaint are `based' on an extrinsic document," and does not apply where the complaint merely cites an extrinsic document.81 For example, in In re Burlington Coat Factory Securities Litigation, the plaintiffs alleged that the company had omitted material information from its annual financial report.82 Even though the plaintiffs had not attached the report to the complaint or explicitly cited it, the report could be considered in ruling on a motion to dismiss because the claims in the complaint were necessarily based on the report.83

PharMerica requests judicial notice of three documents it argues fall into this category.84 The three documents appear to be promotional brochures from the PointClickCare website that explain how the PointClickCare platform works. PharMerica argues that these brochures are "integral" to Relators' claims, which are "premised on their analysis of information contained in" the PointClickCare platform.85 As PharMerica acknowledges, however, Relators do not cite these (or any) PointClickCare brochures in the Amended Complaint.86 Nor can Relators' claims be said to be "based on" the brochures. This is unlike Burlington, where the court looked to the document that constituted the alleged fraud in order to place the statements quoted in the complaint in their proper context. Of course, the existence of the PointClickCare system and the way it functions are relevant to Relators' claims—but Relators base their allegations on their first-hand knowledge of the platform, not on PointClickCare's promotional brochures.

Moreover, the Third Circuit warned in Victaulic against taking judicial notice of exactly this kind of information.87 There, the court held that it was improper for the district court to take judicial notice of facts found on a company's website for several reasons. First, "[a]nyone may purchase an internet address," so authentication of internet materials was particularly important.88 Second, "a company's website is a marketing tool" and the information found therein might well be "full of imprecise puffery that no one should take at face value."89 Finally, the court was particularly troubled that such materials were judicially noticed at the motion-to-dismiss stage.90

These concerns apply squarely to the PointClickCare brochures, which are promotional business materials from PointClickCare's corporate website. Such "private corporate websites, particularly when describing their own business, generally are not the sorts of `sources whose accuracy cannot reasonably be questioned' that our judicial notice rule contemplates."91 This is especially true when a party seeks to use promotional materials found online for their truth, as PharMerica does here.92 Accordingly, the Court will not take judicial notice of the PointClickCare website materials.

III. MOTION TO DISMISS

A. Motion to Dismiss Pursuant to 31 U.S.C. § 3730(e)

The False Claims Act "empowers a person, or `relator,' to sue on behalf of the United States those who defraud the government, and to share in any ultimate recovery."93 That financial incentive, of course, creates the risk that individuals without knowledge of new, unremedied frauds might piggy-back on others' discoveries, earning a payout for themselves without contributing any information of real value.94 The Act's design therefore aims at "promot[ing] private citizen involvement in exposing fraud against the government, while at the same time prevent[ing] parasitic suits by opportunistic late-comers who add nothing to the exposure of the fraud."95 To that end, the Act bars qui tam actions in two circumstances relevant here.96 First, the "government action bar" prevents suits "based upon allegations or transactions which are the subject of a civil suit...in which the Government is already a party."97 Second, the "public disclosure bar" prevents suits "when the alleged fraud has been publicly disclosed in at least one of several enumerated sources—unless the relator is an original source of certain information underlying the action."98 PharMerica argues that both the government action bar and public disclosure bar preclude this action because an earlier qui tam suit against PharMerica, in which the Government intervened, alleged substantially the same fraudulent scheme.

1. Legal Standard: Government Action Bar

Section 3730(e)(3) bars qui tam suits "based upon allegations or transactions which are the subject of a civil suit...in which the Government is already a party." But "the breadth with which we should read the phrase `allegations or transactions which are the subject of a civil suit' is not readily apparent from the text of the statute."99

To determine whether an action is "based upon" the same allegations or transactions as an action to which the government was a party, many courts have followed the First Circuit in looking for signs of a "host/parasite relationship."100 Such a relationship exists if the relator's case is "receiving `support, advantage, or the like' from the `host' case (in which the government is a party) `without giving any useful or proper return' to the government (or at least having the potential to do so)."101 Similarly, the Ninth Circuit has described the bar as preventing qui tam- suits "based on the same underlying facts" as a government action.102 Thus, the government action inquiry is essentially a test of factual similarity. If a relator's allegations are the same as allegations already made by the government, or are similar enough to be characterized as feeding off of the government's allegations, the government action bar applies. By contrast, if a relator's case "is seeking to remedy fraud that the government has not yet attempted to remedy," the government action bar does not apply.103

PharMerica argues that an earlier qui tam suit against it brought by another relator, United States ex rel. Denk v. PharMerica,104 bars this action because the government intervened in that case. There is no dispute that the government was a party to Denk.105 Thus, the question is whether the allegations in this case are sufficiently similar to those in Denk to conclude that Relators are receiving support or advantage from Denk.

2. Legal Standard: Public Disclosure Bar

Section 3730(e)(4)(A) provides that a court "shall dismiss" a qui tam suit "if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed" in any of several sources, including federal civil proceedings. In other words, the public disclosure bar applies when there has been (1) a public disclosure (2) in one of the statute's specified fora (3) of allegations or transactions of fraud (4) that are substantially the same as those alleged by the relator.106 When the public disclosure bar is triggered, however, the action can nonetheless proceed if the relator is an "original source of the information."107 An "original source" is one who "has voluntarily disclosed information to the Government or one `who has knowledge that is independent of and materially adds to' information already publicly disclosed."108

The public disclosure bar is relevant here because both the Relator's Complaint and the Government Complaint in Denk were (1) public disclosures (2) in a federal civil proceeding.109 There can be no question that the public disclosures in Denk consisted of (3) "allegations or transactions" of fraud—in this case, allegations— as opposed to more general information.110 "An allegation of fraud is an explicit accusation of wrongdoing."111 The Denk disclosures were allegations of fraud in the most literal sense—explicit accusations of fraud, itemized and filed in federal court.

The question here, then, is whether Relators' claims are substantially the same as the allegations of fraud made public in Denk.112 Courts examine the similarity of the allegations on a claim-by-claim basis.113 "Where some, but not all, allegations in a complaint have been publicly disclosed, [the public disclosure bar] does not prohibit the remaining allegations from proceeding."114

Several courts have cautioned against conducting the substantial similarity inquiry at too high a level of generality.115 After all, cast in unduly general terms, any two fraud allegations against the same defendant begin to sound similar. Although two complaints might seem similar "at first blush," courts must nevertheless take a careful look at the details of each alleged fraud.116 For example, in Leveski v. ITT Educational Services, the Seventh Circuit noted the superficial similarities between the relator's claims and an earlier False Claims Act case alleging violations of the Higher Education Act ("HEA"). Both relators were "former employees of [the defendant] —and even held the same job title," and both alleged that the defendant "violated the incentive compensation provision of the HEA."117 Nevertheless, the court held that "the details of how [the defendant] allegedly violated the HEA [were] quite different in Leveski's case" than in the earlier one.118 Because Leveski had alleged "a more sophisticated, second-generation method of violating the HEA," the court concluded that the district court had "view[ed] the allegations at too high a level of generality" when it dismissed the complaint.119

The Third Circuit endorsed this particularized, fact-specific approach to the substantial similarity inquiry in both Zizic and United States v. Omnicare.120 By requiring courts to look carefully at the factual similarity between a relator's allegations and a public disclosure, this approach strikes the proper balance between "encouraging private persons to root out fraud and stifling parasitic lawsuits."121

Based on these cases, the Court is not persuaded by PharMerica's argument that disclosures that merely "set government investigators on the trail of fraud" are enough to bar subsequent qui tam suits.122 That kind of superficial similarity is contrary to the statutory language, which bars suits that allege "substantially the same" fraud as the public disclosure in question.123 Allowing any tip, however factually different, to preclude subsequent qui tam suits would not accord with the careful approach of Zizic and Omnicare, nor with the heightened particularity requirements that apply to False Claims Act cases.124

3. The Denk Allegations

As noted above, PharMerica argues that an earlier qui tam suit against it, United States ex rel. Denk v. PharMerica,125 concerned essentially the same alleged fraudulent scheme. As PharMerica characterizes them, both actions relate a scheme to submit false claims for Medicare and Medicaid reimbursement for medications that were dispensed in the absence of a legally valid prescription in violation of state and federal law.126 As a result, it contends, Relators' suit is precluded under either the government action bar, the public disclosure bar, or both.

A careful review of both Relator Denk's Complaint and the Government's Complaint in Denk reveals that Denk disclosed a number of allegations of fraud unrelated to invalid prescriptions and therefore irrelevant here.127 Relator Denk's Complaint also, however, disclosed two alleged fraudulent schemes that do implicate prescription validity.

The Emergency Scheme

Denk alleged that PharMerica submitted false claims for reimbursement in situations where it had violated federal regulations governing dispensation of Schedule II-V narcotics in emergencies. PharMerica was alleged to have violated those emergency regulations in several different ways. Specifically, Denk alleged (1) that PharMerica relied on regulations allowing narcotics to be dispensed on only an oral prescription in emergency situations but failed to secure a written prescription within seven days thereafter as required;128 (2) that PharMerica dispensed narcotics on an emergency basis without even an oral prescription, instead using old prescriptions and order forms;129 and (3) that PharMerica dispensed narcotics on an emergency basis without indicating the justification for an emergency dispense and/or without verifying that an emergency in fact existed.130

The "Narc Box" Scheme

Narcotics boxes are emergency supplies of medications kept on-site at long-term care facilities. Both Denk and the Government alleged that PharMerica "provided staff at long-term care facilities with access to narcotics boxes for emergency situations but did not ensure that the prescriber had an oral communication with a PharMerica pharmacist prior to dispensing the Schedule II drug."131 The government also alleged that "[o]nce the drug was dispensed from a narcotics box, PharMerica routinely failed to obtain written prescriptions from the prescriber within 7 days as required under the [Controlled Substances Act]."132

Further, the Government's Complaint in Denk also alleged a third fraudulent scheme related to prescription validity:

The Order Form Scheme

The government alleged that PharMerica dispensed medications to residents of long-term care facilities "based only on requests from the long-term care facility, rather than...upon a valid prescription from a practitioner."133 This took different forms, including dispensing drugs based solely on "order forms";134 "Prescription Fax Request" sheets, "EZ Refill" forms, or "monthly physician orders from the resident's chart at the facility";135 or residents' hospital discharge orders or "replenishment stickers" previously provided by PharMerica,136 as opposed to a legally valid prescription signed by a practitioner. Upon receipt of a medication order that was not a legally valid prescription, PharMerica would simultaneously dispense the drug and send a "template" to the resident's physician for signature.137 Even if these templates had been returned signed, they would not have constituted valid prescriptions, but they often were not returned at all or were returned only after the drug was dispensed.138

After the government intervened in Denk, the government and PharMerica "entered into a series of settlements to resolve the entirety" of the action in 2015.139

4. Analysis

PharMerica argues that this case is barred by Denk under both the public disclosure bar and the government action bar. As explained, the public disclosure inquiry requires the Court to determine whether the allegations in Denk are substantially similar to Relators' allegations. They are not.

Denk disclosed allegations of several fraudulent schemes by PharMerica, each of which is factually different from the scheme Relators allege. Each of the three prescription-related schemes disclosed in Denk concerned dispensations of medication in the absence of any prescription by a variety of means—by using narcotics boxes without following the applicable regulations; by dispensing drugs on an emergency basis without a written follow-up prescription; and by dispensing drugs upon receipt of an order form, as opposed to a valid prescription. Here, by contrast, Relators allege a scheme to alter valid prescriptions so as to maximize reimbursements. In other words, whereas Denk concerned dispensing medication with no prescription at all, Relators base their allegations on incidents in which PharMerica did receive a valid prescription, but altered that prescription illegally using the LTC400 so as to dispense the most profitable version of the drug in question.

This is not, therefore, a case in which a relator "makes a similar allegation [to the public disclosure], but expands on it substantially."140 It is not, in other words, Denk with added details. Instead, it is a case alleging "a more sophisticated, second-generation method" of fraud, separate and apart from any existing public disclosure.141 Both Denk and Relators do allege —at a high level—schemes that resulted in dispensing drugs without a valid prescription. But, of course, there are many different ways a pharmacy might accomplish that. The mode and means of the scheme alleged here make it wholly different from the ones alleged in Denk.

Indeed, to find the similarities between Denk and this matter, PharMerica massages the facts. For example, PharMerica characterizes both Denk and this action as alleging that "PharMerica dispensed medications to Medicare Part D and Medicaid beneficiaries pursuant to orders that lacked an essential element of a prescription such as strength, dosage form, or quantity prescribed."142 That is technically true: Denk alleged that PharMerica dispensed medications without any prescription; those orders lacked all the essential elements of a prescription in that there was, allegedly, no prescription at all.143 Therein lies the problem—the allegations of fraud in Denk and those in this matter are substantially similar only after abstracting away from the facts of one or both cases to cast them in the most general possible terms.144 At a high enough level of generality, any two False Claims Act cases against the same defendant can be said to allege substantially the same conduct.145 Denk and this action may be two branches of the same family tree, but only if a vague, generic charge of "pharmacy fraud" or "Medicare fraud" is the common ancestor. Thus, the public disclosure bar does not apply.

For the same reason, the government action bar does not preclude this action. Relators' allegations are not "based on the same underlying facts" as those in Denk.146 Nor do they have the qualities of a "host/parasite relationship" in which one case feeds off of or draws support from another.147 The schemes alleged in each case are distinct from each other and Denk therefore has no preclusive effect with respect to Relators' claims.

B. Motion to Dismiss for Failure to State a Claim

1. Legal Standard

PharMerica has also moved to dismiss the Amended Complaint for failure to state a claim under Rule 12(b)(6) and for failure to satisfy the heightened pleading standard of Rule 9(b).

Under Federal Rule of Civil Procedure 12(b)(6), dismissal of a complaint for failure to state a claim upon which relief can be granted is appropriate where a plaintiff's "plain statement" lacks enough substance to demonstrate that he is entitled to relief.148 In determining whether a motion to dismiss should be granted, the court must consider only those facts alleged in the complaint, accepting the allegations as true and drawing all logical inferences in favor of the non-moving party.149 Courts are not, however, bound to accept as true legal conclusions framed as factual allegations.150 Something more than a mere possibility of a claim must be alleged; a plaintiff must allege "enough facts to state a claim to relief that is plausible on its face."151

Additionally, claims under the False Claims Act are subject to the heightened pleading standard of Rule 9(b).152 To satisfy that standard in this context, a relator must plead "particular details of a scheme to submit false claims paired with reliable indicia that lead to a strong inference that claims were actually submitted."153 This can be accomplished in two ways—either by "pleading the date, place, or time of the fraud," or by using an "alternative means of injecting precision and some measure of substantiation into their allegations of fraud."154

A plaintiff need not present specific fraudulent claims for payment at the pleading stage; indeed, this is not necessarily required to prevail even at trial.155 After all, "[s]tanding alone, raw bills—even with numbers, dates, and amounts—are not fraud without an underlying scheme to submit the bills for unperformed or unnecessary work."156 It is that underlying scheme that must be pled with particularity to give defendants fair notice of the claims against them, protect defendants from reputational harm, and prevent the filing of baseless suits that amount to fishing expeditions.157

2. Analysis: Claims Under 31 U.S.C. §§ 3729(a)(1)(A) and (B)

Relators allege violations of 31 U.S.C. §§ 3729(a)(1)(A) and (B) and their state law equivalents. To establish a violation of § 3729(a)(1)(A), a relator must show that "(1) the defendant presented or caused to be presented to an agent of the United States a claim for payment; (2) the claim was false or fraudulent; and (3) the defendant knew the claim was false or fraudulent."158 To establish a violation of § 3729(a)(1)(B), a relator must show that the defendant "(1) made, used, or caused to be made or used, a false record or statement; (2) the defendant knew the statement to be false[;] and (3) the statement was material to a false or fraudulent claim."159 A claim may be factually false or legally false. "A claim is factually false when the claimant misrepresents what goods or services...it provided to the Government."160 By contrast, "a claim is legally false when the claimant knowingly falsely certifies that it has complied with a statute or regulation the compliance with which is a condition for Government payment."161 That latter express false certification theory is the basis of Relators' claims here, because Relators allege that PharMerica sought and received reimbursement upon falsely certifying that it had complied with the applicable laws and regulations governing its dispensation of medications.162

Relators allege that PharMerica submitted false claims for payment for filling prescription orders that were altered in one of three ways: by substituting a different form or dosage of a non-controlled substance than the one prescribed; by substituting a different form or dosage of a controlled substance than the one prescribed; or by substituting a brand name drug for a generic drug.163 By altering prescriptions in these three ways for the purpose of maximizing PharMerica's reimbursement and without consulting with the prescribing physician, Relators allege, PharMerica violated the False Claims Act.164

a. Non-Controlled Substances

Relators claim that PharMerica illegally altered the elements of prescriptions for non-controlled substances such as "stomach medication [e.g., Ranitidine] and anti-depressants [e.g., Fluoxetine]."165 Relators allege that PharMerica systematically substituted alternative forms of the prescribed drugs (e.g., capsules instead of tablets) or alternative dosages or quantities of the prescribed drugs because those alternatives were more profitable for PharMerica to dispense.166 Each time PharMerica submitted a claim for reimbursement for a dispensation pursuant to an altered prescription, Relators claim, PharMerica falsely certified that the dispensation complied with all applicable laws and regulations.

PharMerica first argues that this claim should be dismissed because there is no federal law that governs the prescribing of non-controlled drugs. Rather, PharMerica argues, it is state pharmacy laws that govern the dispensing of these non-controlled substances. Since under Pennsylvania law, the form of a non-controlled drug is not an essential element of a prescription, substituting the capsule form of a non-controlled drug for the tablet form does not violate any law and therefore cannot support Relators' assertion that PharMerica submitted false claims.

PharMerica does not explain the basis for its assertion that Pennsylvania pharmacy laws and regulations apply exclusively to Relators' claims, which are based on conduct that allegedly occurred nationwide.167 However, even if Pennsylvania law does apply, and even if under Pennsylvania law pharmacists may alter the form of a non-controlled substance at will, PharMerica has not shown that this claim should be dismissed. Relators allege not only that PharMerica altered the drug form on prescriptions for non-controlled substances, but also that PharMerica altered the dosage and quantity, which are undisputedly required elements of a valid prescription.168 Moreover, Relators allege this conduct with adequate specificity. Although they are not required to point to specific fraudulent claims at this stage, Relators identify an example of a prescription whose dosage was allegedly altered without the consent of the prescribing physician.169 By supplying the date and prescription number of a particular altered prescription combined with the details of the broader alleged scheme to alter prescriptions, Relators have met the pleading standards of Rule 9(b) for this category of claims.

PharMerica also argues that these non-controlled substances claims are based on an incorrect statement of law by Relators. According to PharMerica, the Amended Complaint inaccurately asserts that a pharmacist "must obtain a discontinue order and a new prescription from the physician before varying in any respect from the details of the original order."170 PharMerica argues that no state or federal law or regulation requires this. Accordingly, it argues, this category of alleged false claims fails, as it was entirely permissible for PharMerica to simply alter prescriptions where necessary rather than discontinuing them and obtaining a brand-new prescription from the prescribing physician.

It is true that the Amended Complaint in several places claims that a discontinue order and new prescription are always required and that this procedure was not followed.171 But the Amended Complaint also alleges more broadly that PharMerica's prescription alterations were unlawful in that they were made without the prescribing physician's consent.172 Thus, even accepting PharMerica's argument that obtaining a discontinue order and new prescription is not legally required, Relators still have alleged that PharMerica violated federal and state laws requiring that pharmacists "first obtain approval from the prescribing medical practitioner" before "deviat[ing] from a prescription."173 Indeed, even the sources on which PharMerica seeks to rely (some of which are not in the record at this stage) confirm that this is required.174

Finally, PharMerica argues broadly that the Amended Complaint lacks the requisite specificity throughout. As noted, Rule 9(b) may be satisfied by pleading "particular details of a scheme to submit false claims" combined with "reliable indicia that lead to a strong inference that claims were actually submitted."175 Based on that standard, PharMerica catalogues the factual details that it believes are missing from Relators' Amended Complaint, both as to the "scheme" and as to the "reliable indicia."

First, PharMerica argues that Relators fail to plead a "scheme" because the Amended Complaint makes only two conclusory allegations: that the LTC400 was designed to prompt clerks to fill prescriptions in the most profitable way and that PharMerica "instructed their clerical personnel to physically alter the prescriptions to make it appear as though the physician had prescribed the drug in a different form, quantity and/or dosage." Beyond those "cursory allegations," PharMerica suggests, the Amended Complaint omits details like the names of individuals who "concocted the alleged scheme" and "oversaw its implementation," the names of pharmacists who altered prescriptions, and the names of nursing home employees who "signed for" and administered the altered prescriptions.176 But listing other factual details that might also have been pled is not a productive way to analyze the sufficiency of a complaint. A careful review of the Amended Complaint shows that Relators describe the alleged scheme in adequate detail, explaining the mechanism of the alleged fraud and the generic identities of those involved (i.e., data clerks, pharmacists, etc.).177 PharMerica cites no authority for the proposition that Relators must identify by name the particular PharMerica employees who designed the LTC400 or those who allegedly altered prescriptions.

Second, PharMerica argues that even if the Amended Complaint does plead a "scheme," it lacks "reliable indicia" that claims were actually submitted. It is true that a relator must do more than "identif[y] a general sort of fraudulent conduct [while] specif[ying] no particular circumstances of any discrete fraudulent statement."178 Thus, PharMerica argues, even if the alleged scheme is adequately pled, it amounts to no more than a "mere opportunity for fraud" without specific instances of claims actually submitted to the government for reimbursement.179

To support this argument, PharMerica cites United States ex rel. Schmidt v. Zimmer, Inc.180 There, the court found fault with the complaint for not including "details concerning the dates of the claims, the content of the forms or bills submitted, their identification numbers, [or] the amount of money they charged to the government," among other things.181 But Schmidt explicitly relied on the rigid interpretation of Rule 9(b)'s particularity requirement then adhered to by the First Circuit, the same rigid interpretation rejected by the Third Circuit in Foglia v. Renal Ventures Management, LLC.182 On this point, therefore, Schmidt does not reflect the current state of the law.

Rather, Foglia is controlling. There, the relator alleged that the defendant, Renal Ventures Management, submitted false claims for reimbursement for vials of the medication Zemplar. Renal's inventory logs showed that it was using fewer vials of Zemplar per day than it would need to had it been using a single vial per patient. Therefore, the relator concluded, Renal must have been harvesting the leftover Zemplar from partially used vials and administering it to other patients. This presented a profitable opportunity for fraud, since "Medicare will reimburse for the full vial of Zemplar, regardless of whether all of the Zemplar is used."183 That is, Renal could have submitted a claim for a full vial of Zemplar for each patient while purchasing fewer vials, reusing the leftovers, and pocketing the difference. By itself, however, this was not enough to create a "strong inference" that Renal had submitted false claims, because harvesting extra Zemplar was permitted so long as certain guidelines were followed. But the relator had also alleged that Renal was not complying with those guidelines. Taking that as true, the court found that the complaint met the requirements of Rule 9(b) and adequately alleged that Renal was fraudulently submitting claims as if it had used exactly one vial per patient.184

Notably, like the Amended Complaint here, the Foglia complaint did not identify particular claims for payment by the government. Instead, it identified "particular details of a scheme to submit false claims"—there, a scheme to reuse vials of Zemplar while submitting claims for payment as if a new vial were used for each patient—combined with "reliable indicia that lead to a strong inference that claims were actually submitted"—there, the inventory logs and the allegation that Renal had not complied with the guidelines for reusing Zemplar vials.

The allegations here are strikingly similar. Relators allege a scheme to alter prescriptions, including the specific time frame of the scheme and the number and type of alterations their audit revealed, with some specific examples identified by RX number. They also allege that PharMerica did not obtain the prescribing physician's consent before altering prescriptions. Relators here have offered at least as much as in Foglia and have cleared the bar of Rule 9(b). Accordingly, the non-controlled substances claims will proceed.

b. Controlled Substances

Relators also allege that PharMerica illegally altered prescriptions for controlled substances. They claim that PharMerica's systematic practice was to alter the essential elements of the prescription, such as the form or dosage specified, so as to substitute a more profitable alternative.185 Each time PharMerica submitted a claim for reimbursement for a dispensation pursuant to an altered prescription, Relators claim, PharMerica falsely certified that the dispensation complied with all applicable laws and regulations.186

In its reply memorandum, PharMerica argues for the first time that this claim should be dismissed because PharMerica has uncovered evidence that the two specific controlled-substance prescriptions Relators identify by RX number in the Amended Complaint were altered legally or not altered at all.187 PharMerica asks the Court to consider this evidence outside the Amended Complaint at the motion-to-dismiss stage on the grounds that the prescription documents are "integral to or explicitly relied upon in the complaint."188 Even if the Court were to consider this evidence at this stage, PharMerica's attempt to rebut Relators' two examples would not support dismissing Relators' entire category of claims based on illegally altered prescriptions for controlled substances. Relators allege that they have identified 924 instances in which PharMerica illegally altered prescriptions for Schedule II controlled substances, not just the two for which RX numbers are offered, and as already explained, Relators need not identify any specific claim for payment at the pleading stage.189 In this category of claims, as in the preceding one, Relators have described "particular details of a scheme to submit false claims"—that is, the design of the LTC400 and the widespread practice of prompting clerks to alter prescriptions to make them more profitable190 —and have paired that alleged scheme with "reliable indicia that lead to a strong inference that claims were actually submitted." Here, some of those "reliable indicia" include the specific time frame of the alleged fraudulent claims (March 2014 through September 2015); a definite number of claims allegedly submitted (924); and the further specification that 143 of those claims involved prescriptions for the drugs OxyContin and Morphine.191

Next, PharMerica argues that any allegation of widespread fraud in the pharmacy industry is inherently implausible under Ashcroft v. Iqbal because that industry is so closely regulated at both the federal and state level.192 This argument is belied by the fact that False Claims Act cases against pharmacy defendants—including some against PharMerica in particular— often survive motions to dismiss.193 Nor is it at all implausible that Reliant, the long-term care facility at which Relators worked, could have administered "thousands of incorrect doses of controlled substances to its residents without anyone noticing or taking action," as PharMerica argues.194 Even if staff at Reliant had been careful to double-check the brand, dosage, and quantity of each medication against the original prescription information, they could very reasonably have assumed that any discrepancies were the result of PharMerica pharmacists conferring with the prescribing physician and getting his or her consent to alter the prescription. That would be noted in PharMerica's files, but not necessarily on the label of the bottle.

PharMerica's argument that these claims broadly do not meet the particularity requirement of Rule 9(b) fails for the same reasons explained above.195 Accordingly, the controlled substances claims will proceed.

c. Brand Names vs. Generics

Finally, Relators allege that PharMerica illegally altered prescriptions for generic drugs, substituting brand-name drugs in violation of applicable federal and state law.196 This was a widespread practice at PharMerica, Relators claim; indeed, PharMerica's computerized drug dispensing system was allegedly designed to prompt clerks to make profitable substitutions even though pharmacists are supposed to consult with the prescribing physician before altering certain elements of a prescription.197 Each time PharMerica submitted a claim for reimbursement for a dispensation pursuant to an altered prescription, Relators allege, PharMerica falsely certified that the dispensation complied with all applicable laws and regulations.

Relators support this claim with two main factual allegations. First, Relators claim that PharMerica "routinely altered and dispensed brand name drugs in lieu of the generic drugs ordered and already on the market."198 Second, they claim that these alterations were made "without a legal prescription."199 Relators also identify two particular substitutions that were allegedly made—the brand-name drug Abilify for the generic Aripiprazole, and the brand-name drug Namenda XR for regular Namenda.200

This kind of substitution—a brand name for a generic—might be unlawful for two reasons. First, to be eligible for government reimbursement, federal and state regulations require that pharmacies dispense generic drugs that are therapeutically equivalent to brand-name drugs when the generic is cheaper.201 If a pharmacy were intentionally dispensing more expensive brand-name drugs to maximize its reimbursements, that would constitute a false claim. Second, as discussed in more detail below, pharmacists are generally not permitted to alter prescriptions without the consent of the prescribing physician.202 If a pharmacy substituted alternative drugs without the physician's consent, the dispensation would not be pursuant to a valid prescription and the pharmacy could not legally seek reimbursement from Medicare or Medicaid.

To state a claim for this alleged scheme of swapping brands for generics, then, Relators must allege either (1) that the generic equivalent prescribed was cheaper than the brand dispensed, so that the substitution violated the requirement to dispense cheaper equivalents,203 or (2) that the generic dispensed was not a therapeutic equivalent so that substitution required the prescribing physician's consent, which was not obtained.204 Although this portion of the Amended Complaint is sparser than the controlled substances and non-controlled substances allegations, discussed below, Relators do allege that the brand-name drugs PharMerica dispensed were more expensive than their available generic equivalents.205 This allegation serves the same purpose as the allegation of non-compliance with the Zemplar reuse guidelines in Foglia: It elevates an opportunity for fraud into an allegation of fraud."206 Accordingly, these claims will also proceed.

3. Analysis: Claims under 31 U.S.C. § 3729(a)(1)(G)

Relators also allege violations of 31 U.S.C. § 3729(a)(1)(G), the so-called reverse false claims provision of the False Claims Act. Whereas §§ 3729(a)(1)(A) and (B) are violated when a person fraudulently requests payment from the government, § 3729(a)(1)(G) is violated when a person withholds payment that is owed to the government:

Based on the same alleged prescription alteration scheme that forms the basis of the claims already discussed, Relators allege two separate violations of § 3729(a)(1)(G) here. First, they allege that PharMerica violated the Corporate Integrity Agreement ("CIA") it entered into as a result of Denk and failed to pay the ensuing penalties to the government. Second, they allege that PharMerica improperly retained the same payments it received as a result of the prescription alteration scheme. In one sense, both of these are based on the same alleged conduct —illegally altering prescriptions. Each alleged violation, however, rests on a separate financial obligation that was allegedly owed to the government—first, the penalties under the CIA, and second, the general obligation to return to the government money it paid out based on fraud or in error. Since the "obligation" is the touchstone of the reverse false claims provision,208 these two alleged violations are considered separately.

a. Obligations Under the Corporate Integrity Agreement

As part of the resolution of Denk, PharMerica entered into a CIA with the Office of the Inspector General ("OIG") of the Department of Health and Human Services.209 That CIA required, among other things, that PharMerica bring itself into compliance with the Controlled Substances Act and related regulations.210 Instead, Relators allege, PharMerica embarked on a new scheme to handle prescriptions illegally, this time by altering them without physician consent so as to maximize reimbursements. That conduct, Relators argue, not only violated §§ 3729(a)(1)(A) and (B) of the False Claims Act, but also violated the CIA, subjecting PharMerica to an obligation to pay penalties to the government.211 By concealing that it had violated the CIA and incurred an obligation to pay, PharMerica thus violated § 3729(a)(1)(G) as well, according to Relators. PharMerica argues that this claim must be dismissed for two reasons: first, because the stipulated penalties in the CIA are contingent obligations that cannot be the basis of a claim under § 3729(a)(1)(G), and second, because the Amended Complaint "does not identify any failure of compliance" with the CIA.

As noted, the reverse false claims provision hinges on the "obligation" to pay money to the government. In 2009, Congress passed the Fraud Enforcement and Recovery Act ("FERA"),212 which amended the False Claims Act and supplied a definition of the term "obligation":

That definition expanded the meaning of "obligation" beyond the limited construction some courts had given it.214 In particular, it included "established dut[ies], whether or not fixed," in contrast to the Sixth Circuit's decision in American Textile Manufacturers Institute, Inc. v. The Limited, Inc., which had restricted the meaning of "obligation" to the kinds of duties "that gave rise to actions of debt at common law"215 —that is to say, fixed obligations. The Senate Judiciary Committee Report on the FERA amendments explained that this definition was framed so as to include "contingent, non-fixed obligations" spanning a "spectrum" from "the fixed amount debt obligation where all particulars are defined to the instance where there is a relationship between the Government and a person that `results in a duty to pay the Government money, whether or not the amount owed is yet fixed.'"216 At least some contingent, non-fixed obligations are now, therefore, actionable under the reverse false claims provision of the FCA.217

Contingent obligations are only actionable within reason, however—future duties to pay that are too speculative may not be a valid basis for claims under § 3729(a)(1)(G). The Third Circuit explained this limitation in United States ex rel. Petras v. Simparel, Inc.218 There, the relator was the chief financial officer of a software company in which the Small Business Administration, a federal agency, became a preferred shareholder. Under the company's certificate of incorporation, it was required to pay accrued dividends to preferred shareholders under two specified conditions. The relator alleged that the company "engaged in certain fraudulent conduct—to which he objected—in order to avoid paying the SBA these contingent dividends."219 He did not, however, allege that either of the two conditions had occurred.220 In considering the statutory language, the court concluded that the phrase "an established duty, whether or not fixed" excluded "obligation[s that] did not exist when the defendants' alleged misconduct occurred."221 In other words, the obligation to pay must have existed at the time of the misconduct—that is, it was "established"— but the amount need not have been fixed.

Since FERA's enactment, courts have split on the question whether stipulated penalty provisions of a CIA are "obligations" for reverse false claims purposes. All agree that that "a breach of [a government] contract can give rise to an `obligation'" under the reverse false claims provision.222 Further, CIAs are contracts with the government. Beyond that, the cases diverge. A few have concluded that the contractual nature of the stipulated penalties by itself makes them "obligations."223 Most, however, have looked beyond the fact of the contract to its terms, concluding that where stipulated penalties are contingent on the exercise of governmental discretion, they are not "obligations."224

The majority position is more persuasive. It is true that ordinarily, a contract with a standard liquidated damages clause creates a present obligation to pay upon breach, whether the nonbreaching party exercises its discretion to sue for enforcement or not. The minority position holds by analogy that even if a CIA conditions the payment of penalties on OIG's exercise of discretion—that is, even if the penalties become due only after OIG determines that they are appropriate—an obligation exists. The minority position, however, is "insufficiently attentive to the language" that is typical of CIAs.225 Unlike a standard liquidated damages clause, the CIA between PharMerica and the government provides that failure to comply with the CIA "may lead to the imposition of...monetary penalties."226 Similarly, it provides that "[u]pon a finding that PharMerica has failed to comply" with any term of the CIA "and after determining that Stipulated Penalties are appropriate," OIG will notify PharMerica of "OIG's exercise of its contractual right to demand payment of the Stipulated Penalties."227 These terms do not describe an "established duty" to pay money to the government —at the time of breach, the penalties are not yet due. Instead, these contract provisions describe a possible future duty. Despite the contractual relationship between PharMerica and the government, therefore, these stipulated penalties are more akin to regulatory fines than to typical contractual liquidated damages.228 Because there is no "established duty" until the government exercises its discretion to demand payment, the stipulated penalties are not "obligations."229

The Court recognizes the unfortunate implications of so holding. When it enters into a CIA like this one, the Government cannot enforce any stipulated penalties without notice that the CIA was violated. Where a party to a CIA fails to give notice voluntarily, it may be that a qui tam action under the reverse false claims provision is the only mechanism for recovering the stipulated penalties due. Shielding alleged recidivist fraudsters from qui tam liability for "improperly avoid[ing]" the stipulated penalties of a CIA may not be desirable as a matter of policy. This outcome, however, could easily be avoided if CIAs were structured so that stipulated penalties would become due upon breach, not merely upon the exercise of discretion by OIG, like most liquidated damages. For whatever reason, the Government has chosen to make these stipulated penalties contingent. As a result, no "obligation" can exist for § 3729(a)(1)(G) purposes until OIG exercises its discretion to demand payment. Because Relators have not alleged that such an exercise of discretion occurred, they have not stated a claim under this provision based on the CIA.

b. Retention of Payments for Claims Based on Altered Prescriptions

Relators also allege that PharMerica violated § 3729(a)(1)(G) by retaining the fraudulently obtained payments that form the basis of Relators' claims under §§ 3729(a)(1)(A) and (B). PharMerica argues that this alleged conduct does not support a claim under § 3729(a)(1)(G) because it merely duplicates the same alleged conduct that formed the basis of Relators' claims under §§ 3729(a)(1)(A) and (B).

The established rule prior to the 2009 FERA amendments was that a claim for mere retention of government payments that were fraudulently obtained in the first place did not state a claim under § 3729(a)(1)(G).230 In other words, relators were barred from asserting that the same fraudulent claim for payment constituted both a "false claim" under § 3729(a)(1)(A) or (B), in the first instance, and a "reverse false claim" under § 3729(a)(1)(G), once a defendant received and retained payment on that claim. As explained above, however, in 2009 Congress added to the statute a definition of the term "obligation":

The Patient Protection and Affordable Care Act then defined "overpayment" as "any funds that a person receives or retains under subchapter XVIII [Medicare] or XIX [Medicaid] of this chapter to which the person, after applicable reconciliation, is not entitled under such subchapter."232 The ACA also clarified that a "repayment retained by a person after the deadline for reporting and returning the overpayment" is an "obligation" for False Claims Act purposes.233 The parties dispute whether the anti-duplication rule survived these developments.

Every case the Court is aware of that expressly considered this issue concluded that the rule still applies234 —relators may not use § 3729(a)(1)(G) as a "redundant basis" for liability.235 The Court agrees that the logic of that rule still obtains. Rather than permitting a double recovery for conduct already covered by other provisions of the False Claims Act, the "retention of overpayments" language seems to impose liability in at least two situations not clearly covered before the FERA amendments. First, it allows for liability when a party unknowingly presents a false claim, realizes its mistake, and knowingly retains the resulting overpayment. Second, it allows for liability when a government contractor "receive[s] money from the government incrementally based upon cost estimates" and retains "money that is overpaid during the estimate process."236 Recognizing that both these situations are "different from fraudulently obtaining the payment in the first place,"237 this sensible interpretation gives independent meaning to each provision of the statute.238

Because this subset of Relators' claims merely recasts their §§ 3729(a)(1)(A) and (B) claims, these claims will also be dismissed.239

C. Relator Sturgeon's Retaliation Claim

Relator Sturgeon finally alleges retaliation against her in violation of the False Claims Act for investigating and reporting PharMerica's alleged violations. PharMerica argues that Sturgeon has not stated a claim for retaliation, or, alternatively, that her retaliation claim is collaterally estopped.

1. Sufficiency of Pleadings

To state a claim under the False Claims Act's retaliation provision,240 a relator must allege (1) that she engaged in "protected conduct," that is, acts done "in furtherance of" a False Claims action, and (2) that she was "discriminated against because of" that protected conduct.241 "Protected conduct" includes "investigation for, initiating of, testimony for, or assistance in" a qui tam action.242 "Discrimination" includes actions "that might have dissuaded a reasonable worker from engaging in the protected conduct,"243 and "[t]he cumulative impact of retaliatory acts may become actionable even though the actions would be de minimis if considered in isolation."244 Both the "protected conduct" inquiry and the "discrimination" inquiry are fact specific and context dependent.245

Sturgeon has sufficiently alleged that she engaged in "protected conduct." The Amended Complaint recounts Sturgeon's internal investigation into potential false claims while working at PharMerica, during which she discovered the violations she alleges in this qui tam action.246 Sturgeon reported her findings to superiors at PharMerica at least four times during that period.247 This kind of "internal reporting and investigation of an employer's false or fraudulent claims" is undoubtedly protected conduct under the retaliation statute.248

Sturgeon has also sufficiently alleged that PharMerica "discriminated" against her for that protected conduct. PharMerica attempts to characterize the Amended Complaint as alleging a workplace that was merely unpleasant but not discriminatory, picking out phrases like "discrediting [Sturgeon's] work" and "deliberately embarrassing [Sturgeon]." Fairly read, however, the Amended Complaint alleges a coordinated campaign to diminish Sturgeon's job responsibilities in response to her whistleblowing activity. It alleges that when Sturgeon brought the results of her review to the attention of Senior Vice President for Sales and Marketing Mark Lindemoen, he "shut down the meeting and ordered Sturgeon to stop her investigation," and "demanded that she stop conferring with management" about the "issues that she had identified."249 When she persisted, management "sought to conceal her findings by discrediting her work, limiting her authority, redefining her role, [and] narrowing her responsibilities."250 She experienced an "unexplained and sudden diminution" of her "duties and responsibilities."251 Even more specifically, she alleges that the "diminishing of her job duties and responsibilities" was "retaliatory" and that it "created an intolerable work environment."252

A direct order from a superior to stop investigating potential fraud would certainly dissuade "a reasonable worker from engaging in [that] protected conduct."253 So would an otherwise unjustified decision to diminish her job responsibilities.254 Accordingly, Sturgeon has adequately alleged both elements of a retaliation claim.

2. Collateral Estoppel

PharMerica next argues that Sturgeon's retaliation claim is collaterally estopped because it was adjudicated in an earlier action. Sturgeon previously sued PharMerica for breach of her employment agreement as well as violation of the Pennsylvania Wage Payment and Collection Law.255 That employment action was resolved by jury trial, at which the sole question the jury answered was:

The jury answered "no."256 PharMerica argues that that jury verdict precludes Sturgeon from asserting a diminution of her job responsibilities in this action.

Collateral estoppel applies when "(1) the issue sought to be precluded is the same as that involved in the prior action; (2) that issue was actually litigated; (3) it was determined by a final and valid judgment; and (4) the determination was essential to the prior judgment."257 "A determination ranks as necessary or essential only when the final outcome hinges on it."258

The question posed to the jury in the Employment Action was not whether Sturgeon experienced a material diminution in her duties. Rather, the question was why she resigned her position. The phrasing of the question permitted the jury to conclude that, while Sturgeon did experience a material diminution in her duties, that diminution was not the reason she resigned. Therefore, based on the information available to the Court, the determination that Sturgeon did not experience a material diminution in her duties was not "essential" to the jury's verdict, and Sturgeon is not precluded from litigating that issue here. Accordingly, Sturgeon's retaliation claims can proceed.

IV. CONCLUSION

Relators' claims under the reverse false claims provision will be dismissed without prejudice. Relators' remaining claims are adequately pled and are not precluded, so they may proceed. An appropriate order follows.