United States District Court, E.D. Wisconsin
UNITED STATES OF AMERICA, ex rel. JENNIFER BUTH, et al. Plaintiffs,
WALMART INC. Defendant.
DECISION AND ORDER ON DEFENDANT'S MOTION TO
JOSEPH UNITED STATES MAGISTRATE JUDGE
Buth brought this qui tam action against Walmart Inc. on
behalf of the United States, thirty-one individual states,
the District of Columbia, and the City of
Chicago. (Docket # 1, Docket # 17.) Buth alleges
that Walmart violated the False Claims Act
(“FCA”), 31 U.S.C. § 3729, and similar state
statutes through various pharmacy practices. (Docket # 1,
Docket # 17.) Walmart has moved for dismissal for failure to
state a claim on which relief can be granted. (Docket # 38.)
For the reasons below, Walmart's motion to dismiss will
be granted in part and denied in part.
survive a motion to dismiss under Federal Rule of Civil
Procedure 12(b)(6), a plaintiff must satisfy Rule 8(a) by
providing a “short and plain statement of the claim
showing that the pleader is entitled to relief . . . in order
to give the defendant fair notice of what the . . . claim is
and the grounds upon which it rests.” Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 545 (2007) (quoting
Conley v. Gibson, 355 U.S. 41, 47 (1957)).
Additionally, the allegations must suggest that the plaintiff
is entitled to relief beyond the speculative level.
E.E.O.C. v. Concentra Health Services, Inc., 496
F.3d 773, 777 (7th Cir. 2007). I must construe the complaint
“in the light most favorable to the plaintiff, taking
as true all well-pleaded factual allegations and making all
possible inferences from those allegations in his or her
favor.” Lee v. City of Chicago, 330 F.3d 456,
459 (7th Cir. 2003). However, in deciding a motion to
dismiss, I am not bound to accept as true legal conclusions
couched as facts. Bonte v. U.S. Bank, N.A., 624 F.3d
461, 465 (7th Cir. 2010).
claims are subject to the heightened pleading requirements of
Rule 9(b). United States ex rel. Presser v. Acacia Mental
Health Clinic, LLC, 836 F.3d 770, 775 (7th Cir. 2016)
(citing United States ex rel. Gross v. AIDS Research
All.-Chi., 415 F.3d 601, 604 (7th Cir. 2005)). Under
Rule 9(b), a plaintiff alleging fraud must state with
particularity the circumstances constituting fraud-the
“who, what, when, where, and how.” Presser, 836
F.3d at 776 (quoting United States ex rel. Lusby v.
Rolls-Royce Corp., 570 F.3d 849, 853 (7th Cir. 2009))
(internal quotation marks omitted). The precise details that
must be included may vary depending on the facts of the case,
and courts must “remain sensitive to information
asymmetries that may prevent a plaintiff from offering more
detail.” Pirelli Armstrong Tire Corp. Retiree Med.
Benefits Tr. v. Walgreen Co., 631 F.3d 436, 443 (7th
Cir. 2011) (citing In re Rockefeller Center Props., Inc.
Sec. Litig., 311 F.3d 198, 216 (3d Cir. 2002)).
Nevertheless, plaintiffs must “use some . . . means of
injecting precision and some measure of substantiation into
their allegations of fraud.” Presser, 836 F.3d at 776
(quoting 2 James Wm. Moore et al., Moore's Federal
Practice § 9.03[b], at 9-22 (3d ed. 2015)); see also
Pirelli, 631 F.3d at 442.
a licensed pharmacist who worked as a pharmacy manager at
Walmart's New Berlin, Wisconsin pharmacy from July 2017
to May 2018. (Docket # 17 ¶¶ 27-28.) Walmart is a
publicly traded Delaware corporation with its principal place
of business in Arkansas, but doing business throughout all of
the party states, the District of Columbia, and the City of
Chicago. (Id. ¶ 63.)
is a government healthcare program that pays for reasonable
and necessary healthcare for beneficiaries. (Id.
¶ 69.) Under Medicare Part D, the government pays a
percentage of the cost of covered drugs dispensed with valid
prescriptions. (Id. ¶¶ 78, 84.) The U.S.
Department of Health and Human Services oversees the Medicare
program and makes payments through the Center for Medicare
and Medicaid Services (“CMS”). (Id.
¶ 72.) CMS does not pay pharmacies directly; it pays
Medicare Part D “Plan Sponsors, ” typically
private insurance companies, who pay pharmacies directly or
through intermediaries known as Pharmacy Benefit Managers
(“PBMs”). (Id. ¶¶ 78-79.) When
a pharmacy dispenses a drug to a Medicare beneficiary, it
submits an electronic claim to the Plan Sponsor and receives
payment for the price minus any portion that must be paid by
the beneficiary. (Id. ¶ 80.)
generates “Prescription Drug Event”
(“PDE”) records to support its claims for
government payment, which it sends to CMS via PBMs and the
Plan Sponsor. (Id. ¶ 87.)
record must include accurate data including the drug
dispensed, the prescription number, the dispensing fee paid
to the pharmacy, the cost of the drug, the quantity
dispensed, and the provider who ordered the medication.
(Id. ¶ 88.) That such data be “true,
accurate, and complete” is a condition of payment under
the Medicare Part D program. (Id. ¶ 89.)
first amended complaint alleges that Walmart pharmacies
nationwide defrauded the government through four
“schemes”: 1) dispensing less medication than
prescribed but billing for the full amount
(“short-filling”); 2) dispensing and billing for
more medication than necessary for a particular period
(“days' supply”); 3) dispensing and billing
for 90-day supplies instead of 30-day supplies without
consent or clinical need (“conversion”); and 4)
billing for medications dispensed with inaccurate expiration
dates. (Id. ¶¶ 143-283.) Buth asserts that
these alleged schemes resulted in the submission of false
claims and materially false PDE data to CMS and improper
retention of money owed to the government. (Id.
is the primary vehicle used by the government for recouping
losses suffered through fraud. United States v.
Sanford-Brown, Ltd., 788 F.3d 696, 700 (7th Cir. 2015),
reinstated in part, superseded in part by United States
v. Sanford-Brown, Ltd., 840 F.3d 445 (7th Cir. 2016).
The FCA imposes liability on one 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 or fraudulent
claim; [. . .]
(G) knowingly makes, uses, or causes to be made or used, a
false record or statement material to an obligation to pay or
transmit money or property to the Government, or knowingly
conceals or knowingly and improperly avoids or decreases an
obligation to pay or transmit money or property to the
31 U.S.C. § 3729(a)(1). “Knowingly” means
that a person has actual knowledge of the falsity of the
information or acts with purposeful ignorance or reckless
disregard of its falsity, but not necessarily specific intent
to defraud. Sanford-Brown, 788 F.3d at 700 (citing 31 U.S.C.
§ 3729(b)(1); United States ex rel. Sheet Metal
Workers Int'l Ass'n v. Horning Invs., LLC, 828
F.3d 587, 593 (7th Cir. 2016)); see also United States ex
rel. Berkowitz v. Automation Aids, Inc., 896 F.3d 834,
842 (7th Cir. 2018) (mistake or negligence does not give rise
to FCA claim). Falsity includes express misrepresentations
and misrepresentation by omission. See United States ex
rel. Lisitza v. Par Pharm. Cos., 276 F.Supp.3d
779, 789 (N.D.Ill. 2017). A “claim” under the
statute “includes direct requests to the Government for
payment as well as reimbursement requests made to the
recipients of federal funds under federal benefits
programs.” Universal Health Servs., Inc. v. U.S. ex
rel. Escobar, 136 S.Ct. 1989, 1996 ((citing 21 U.S.C.
establish civil liability under the FCA, a relator generally
must prove (1) that the defendant made a statement in order
to receive money from the government; (2) that the statement
was false; and (3) that the defendant knew the statement was
false. Id. (citing United States ex rel. Gross
v. AIDS Research Alliance-Chicago,415 F.3d 601, 604
(7th Cir. 2005)). The FCA also imposes a rigorous materiality
requirement. United States ex re. Thornton v. Pfizer
Inc., No. 16-cv-7142, 2019 WL 1200753, at *5 (N.D. Ill.
Mar. 14, 2019) (citing Escobar, 136 S.Ct. at 2002).
“Material” means ...