SELYA, Circuit Judge.
The False Claims Act (FCA), 31 U.S.C. §§ 3729-3733, authorizes private parties to bring qui tam actions on the government's behalf alleging fraud on government programs. Although such actions can be powerful weapons for rooting out chicanery shrouded in darkness, the FCA forbids private suits once the sun has shone on the essential features of the alleged misconduct. Thus, courts generally must refuse to entertain FCA suits "if substantially the same allegations or transactions as alleged in the action ... were [already] publicly disclosed" through certain enumerated sources.
Applying this provision, known as the public disclosure bar, the court below determined that the complaint in this action rested on allegations that were already in the light of day.
We draw the essential facts from the relators' second amended complaint and other documents, described
The relators, Myron Winkelman and Stephani Martinsen, brought this qui tam action under the FCA and (in its current form) the analogous statutes of eleven states. In it, they challenged particular billing practices of CVS Caremark Corp. and certain affiliated companies (collectively, CVS). The main target of their complaint was CVS's conduct with respect to a program that the company had instituted in 2008. That program was known as the Health Savings Pass (HSP). A consumer could join the HSP program by paying a nominal enrollment fee (originally $10 and later increased to $15). HSP membership entitled a consumer, among other things, to purchase a range of generic prescription drugs from CVS at discounted prices (either $9.99 or $11.99 for a 90-day supply).
The relators assert that the HSP framework was a carefully constructed artifice that allowed CVS to fraudulently overbill Medicare Part D and Medicaid. Both of these federal healthcare programs contain conditions designed to control the cost to the government of prescription drugs. One
The relators allege that CVS designed the HSP program to circumvent the applicable U&C requirements; that the HSP prices reflect the actual U&C prices charged by CVS under all the relevant federal and state statutes and regulations; and that CVS defrauds the government by not reporting the HSP prices as its U&C prices. They offer examples of drugs for which the U&C price reported by CVS was higher than the price charged to participants in the HSP program, allegedly leading to overpayments by Medicaid and Medicare Part D.
But the filing of the relators' action did not mark the first occasion that CVS's HSP pricing came under scrutiny. In February of 2010, a coalition of labor unions under the banner "Change to Win" issued a report comparing the HSP drug prices charged by CVS with prices charged by CVS for the same drugs to federal employees enrolled in the Federal Employee Health Benefits Program (FEHBP). The report concluded that in its role as the FEHBP's pharmacy benefits manager, CVS overcharged by "hundreds of millions of dollars." This conclusion rested primarily on the report's finding that the prices charged by CVS to the FEHBP were higher than the counterpart HSP prices for 85% of generic drugs available in both programs. News outlets pounced upon the Change to Win report and reported its findings extensively.
The allegations attracted attention in Washington as well: a Change to Win representative testified before Congress in late February of 2010 and advocated revising the FEHBP prescription drug program. In November of 2010, a Congressional Research Service (CRS) report rehearsed some of Change to Win's allegations.
Meanwhile — after the issuance of the Change to Win report but before the issuance of the CRS report — Connecticut altered its statutes to explicitly require CVS to take its HSP prices into account in its dealings with the state's Medicaid program. CVS responded by threatening to end the HSP program in Connecticut. Battling back, the Attorney General of Connecticut announced that he had subpoenaed CVS to obtain details related to the administration of the HSP program. In a
The press release highlighted the fact that CVS was continuing to offer the HSP program to consumers in other states. It declared that CVS "has an obligation to charge the state of Connecticut the same discounted price for drugs for Connecticut Medicaid recipients that CVS Caremark charges to customers enrolled in the [HSP] pharmacy discount program." The ensuing subpoena sought information about how HSP prices "compared to those billed Connecticut's Medicaid program," CVS's costs for those medications, the details of HSP enrollment in Connecticut, and information about states in which the program operated.
The Attorney General's activities attracted appreciable media attention, and all of the significant information contained in the press release was replicated in the ensuing media coverage. The media also reported CVS's response, including the company's assertion that Connecticut's Medicaid regulations did not require CVS to pass on HSP prices to the state Medicaid program.
It was not until August of 2011 — over a year after the outpouring of publicity regarding CVS's refusal to give Connecticut the benefit of its HSP pricing — that the relators brought this suit. The relators filed an amended complaint in March of 2013, and a second amended complaint in June of 2014. These various iterations of the complaint were kept under seal while the federal government and the designated states considered whether to intervene.
Once the United States and all the states named in the second amended complaint had declined to intervene, the district court unsealed the action on August 11, 2014.
On appeal, the relators insist that the disclosures surrounding the Change to Win report and the Connecticut controversy do not suffice to trigger the public disclosure bar. We divide our treatment of their asseverational array into three segments. First, we clear some procedural underbrush affecting the scope of the relevant record. Second, we determine whether a public disclosure occurred and, if so, whether that disclosure limned a fraud substantially similar to the one alleged in
Our standard of review is clear: we engage in a de novo canvass, accepting as true the well-pleaded facts and drawing all reasonable inferences in the non-movant's favor.
The FCA contains qui tam provisions that allow private persons, called relators, to bring civil suits on behalf of the United States against those alleged to have knowingly submitted false claims to the federal government.
The contours of the public disclosure bar underwent some alterations during the period covered by this action. Prior to 2010, the pertinent provision stated that "[n]o court shall have jurisdiction over an action under this section based upon the public disclosure of allegations or transactions" from any one of several enumerated sources. 31 U.S.C. § 3730(e)(4)(A) (2009). This explicit jurisdiction-stripping language spoke directly to the subject matter jurisdiction of the court.
This approach was made questionable by the Patient Protection and Affordable Care Act (PPACA), Pub. L. No. 111-148, § 10104(j)(2), 124 Stat. 119 (2010), which reshaped the contours of the public disclosure bar to provide in pertinent part that "[t]he court shall dismiss an action or claim under this section, unless opposed by the Government, if substantially the same allegations or transactions as alleged in the action or claim were publicly disclosed."
Here, the parties dispute whether the reconfigured public disclosure bar is jurisdictional. The district court, citing decisions from several of our sister circuits, concluded that it is not.
Although we find the district court's analysis impressive, we recognize that appellate courts should not rush to resolve questions of statutory interpretation when it is not necessary to do so. That maxim is especially appropriate where, as here, the statutory change straddles the relevant events and, thus, presents potential retroactivity concerns.
The first aspect hawked by the relators is a red herring. They suggest that if the public disclosure bar is no longer jurisdictional, then it must be viewed as an affirmative defense. Building on this foundation, they argue that an affirmative defense cannot be resolved at the motion-to-dismiss stage. But even accepting the premise of the relators' suggestion, their conclusion is wrong: an affirmative defense may serve as a basis for dismissal under Rule 12(b)(6).
Second, CVS contends that a determination as to whether the public disclosure bar is jurisdictional may affect the scope of the relevant record. This concern affects two declarations submitted by the relators as part of their opposition to the motion to dismiss, which could be considered in evaluating the existence of jurisdiction under Rule 12(b)(1).
We add a coda. The press release, news articles, CRS report, and record of
As we already have noted, the public disclosure bar forecloses a qui tam action "if substantially the same allegations or transactions as alleged in the action ... were publicly disclosed" in a list of enumerated sources. 31 U.S.C. § 3730(e)(4)(A). In applying this provision, we examine whether the allegations or transactions identified in the relators' complaint have already been publicly disclosed.
The relators do not contest that the materials cited by CVS appeared in statutorily enumerated sources. They argue, however, that there was no public disclosure of the relevant allegations or transactions and that the disclosures upon which CVS relies did not reveal allegations or transactions that were substantially the same as those that anchored their complaint. Their fallback position is that, in all events, their action evades the public disclosure bar because they meet the statutory definition of "original source." 31 U.S.C. § 3730(e)(4)(B).
As a general matter, a "public disclosure occurs when the essential elements exposing the particular transaction as fraudulent find their way into the public domain."
In the relators' words, the true state of affairs was that "CVS was illegally refusing to charge the Medicaid and Medicare programs its true U&C lower prices, in multiple states, and was hiding that fact." The misrepresented state of affairs, they allege, grew out of CVS's false assertion that it "was giving its U&C prices to the Medicaid and Medicare programs." They add that, prior to the institution of their suit, no public disclosure of either set of facts occurred.
This disclaimer rings hollow when the Connecticut publicity is factored into the mix.
On this record, it requires hardly an inferential step to connect the allegedly true and allegedly misrepresented facts. The publicly disclosed materials revealed, quite plainly, that CVS was not providing its HSP price as its U&C price to Connecticut's Medicaid program. That is precisely why the Connecticut legislature essayed a statutory fix.
In an effort to resist this conclusion, the relators submit that the Connecticut disclosures showed only a price gouging scheme, not a scheme to defraud Medicaid and Medicare Part D. This quibbling is unavailing: the public disclosure bar contains no requirement that a public disclosure use magic words or specifically label disclosed conduct as fraudulent.
The relators next asseverate that the earlier disclosures do not unmask "substantially the same allegations or transactions" as the scheme identified in their
In evaluating substantial similarity, an inquiring court should bear in mind the core purpose of the FCA: to encourage suits by individuals with valuable knowledge of fraud unknown to the government.
These principles control here. The relators describe their complaint as "focus[ing] on the CVS retail pharmacies and alleg[ing] that when CVS submitted claims to Medicaid and Medicare Part D it illegally and knowingly did not give the HSP discount prices to the governments and did not report the HSP prices as the U&C [prices]." But this was not new ground: the anatomy of this scheme was comprehensively revealed in the Connecticut disclosures. Those disclosures openly discussed the HSP program, its inexpensive pricing arrangement, CVS's unwillingness to provide the HSP prices in its dealings with Connecticut Medicaid, and the state's belief that CVS was required to do so.
The relators labor to distinguish their complaint from the public disclosures by emphasizing its breadth: the Medicare Part D program was never mentioned in the Connecticut disclosures, nor did those disclosures aver that CVS was allegedly playing fast and loose with the Medicaid program in other states. This argument elevates form over substance. When it is already clear from the public disclosures that a given requirement common to multiple programs is being violated and that the same potentially fraudulent arrangement operates in other states where the defendant does business, memorializing those easily inferable deductions in a complaint does not suffice to distinguish the relators' action from the public disclosures.
So it is here. The public disclosures spelled out the workings of the alleged scheme in the context of the Connecticut Medicaid program. The relators' complaint described the same alleged scheme — and the scheme worked in essentially the same way under both Medicare Part D and the range of other state Medicaid programs. Because the complaint targets the same fraudulent scheme that was laid bare in the Connecticut disclosures, the identification of additional government programs does nothing more than add a level of detail to knowledge that was already in the public domain.
The relators' attempt to gain traction from our decision in
To say more on this point would be supererogatory. We hold that the essential elements of the transactions and events underlying the relators' allegations were publicly disclosed in the course of the earlier Connecticut dispute and that the scheme depicted in those earlier disclosures was substantially the same as the
The relators claim that their action nevertheless survives under the original source exception to the public disclosure bar.
It follows that relators who do not come forward until after a public disclosure has occurred face additional hurdles to original source status. In this instance, the relators' attempt to assume the mantle of original source status cannot clear the "materially adds" hurdle (and, thus, we do not address the "independent knowledge" hurdle).
The meaning of the "materially adds" language in the original source exception is a matter of first impression for this court. At its most abecedarian level, an addition is material if it is "[o]f such a nature that knowledge of the item would affect a person's decision-making," or if it is "significant," or if it is "essential."
The question of whether a relator's information "materially adds" to public disclosures often overlaps with the questions of whether public disclosure has occurred and, if so, whether the relator's allegations are substantially the same as those prior revelations.
In the case at hand, the relators muster a host of arguments in support of their claim to original source status. These arguments draw on both their complaint and the declarations submitted as part of their opposition to CVS's motion to dismiss. We slice these arguments into four quadrants and engage them separately.
The first slice need not detain us. The relators recycle their arguments about the presence of the fraud in other states and under Medicare Part D as a basis for claiming that they have materially added to the public disclosures. We rejected those self-same arguments in determining that the complaint alleges a scheme substantially the same as that revealed by the public disclosures, and the relators' arguments are no more persuasive in the original source context. The public disclosures revealed that CVS operated its HSP program in multiple states and was fiercely resistant to the idea that HSP prices had to be provided to government healthcare programs. The relators cannot plausibly claim to have materially added to that knowledge.
The relators' second argument focuses on the temporal scope of the alleged fraud. They say that they have supplied original information indicating that CVS's fraud continued after the company's 2010 dispute with Connecticut.
Third, the relators trumpet their personal knowledge of specific instances of alleged overbilling. For example, Winkelman says that, while conducting claim audits, he "observed that CVS's reported U&C prices were higher than its discount plan HSP prices." Similarly, Martinsen says that she has provided specific examples of overpaid claims at the retail level and that she personally contacted Medicaid and Medicare Part D payors to confirm that they were paying more than the HSP prices for drugs included in their programs. But the public disclosures made it crystal clear that CVS was not providing its HSP prices to Medicaid and, by extension, to Medicare Part D. Offering specific examples of that conduct does not provide any significant new information where the underlying conduct already has been publicly disclosed.
The relators' last argument involves Martinsen's importuning that she has provided critical evidence of CVS's intent to defraud the government — evidence gleaned
We do not rule out the possibility that furnishing information that a particular defendant is acting "knowingly" (as opposed to negligently) sometimes may suffice as a material addition to information already publicly disclosed.
Martinsen's additional information merely confirms this state of affairs. At most, her allegations add detail about the precise manner in which CVS operated the HSP program, and a relator who merely adds detail or color to previously disclosed elements of an alleged scheme is not materially adding to the public disclosures.
That ends this aspect of the matter. Because the relators offer no new information that materially adds to what previously appeared in public disclosures, they do not qualify as original sources.
The short of it is that the relators' suit depicts a scheme that was publicly disclosed before the filing of their complaint. That scheme is substantially the same as the scheme delineated in publicly disclosed materials. And because the relators have proffered nothing that materially adds to the publicly disclosed information, they are not "original sources" as that term is used in the jurisprudence of the FCA.
We need go no further.