© Reuters. FILE PHOTO: The Supreme Court of the United States in Washington on March 27, 2023. REUTERS/Evelyn Hochstein/File Photo
Written by John Crozel
WASHINGTON (Reuters) – The U.S. Supreme Court on Thursday gave whistleblowers a boost as they try to revive lawsuits accusing pharmacy operators of willfully overpaying for government health insurance programs for prescription drugs at the expense of taxpayers.
The justices, in a 9-0 decision, overturned a lower court ruling that pharmacies could not be held liable for fraud in whistleblower cases filed against Safeway Inc, which is owned by Albertsons Companies Inc, and SuperValu Inc, which is part of United Natural Foods (NYSE:)
At issue has been whether companies can avoid liability for fraud by showing that an “objectively reasonable” reading of the law supports their behavior – regardless of whether they really believed the interpretation at the time they made an alleged error.
The lawsuit was brought under a law called the False Claims Act that allows individuals to sue on behalf of the United States government when they have evidence of fraud against federal programs. The whistleblower, seeking monetary damages, accused the companies of offering discounted prescription drugs to most out-of-pocket customers, while improperly charging the government higher prices.
Government healthcare programs compensate pharmacies for dispensing covered medications to beneficiaries.
Whistleblower Thomas Proctor sued Safeway while whistleblowers Tracy Schott and Michael Yarberry sued SuperValu.
Whistleblower advocacy groups and a number of states said the Supreme Court ruling against the whistleblower would make it easier for fraudsters to evade accountability for making false claims to the government and risk undermining state-run Medicaid programs.
Federal law requires pharmacies to bill Medicare and Medicaid programs at the same rates that they charge the general public at a rate known as the “usual and customary” pharmacy rate, the whistleblower said. They also said that both companies knew they were defrauding the government and worked to hide their pricing practices.
The companies fended off whistleblower lawsuits by claiming that Medicare and Medicaid billing requirements were not clear and that their practices were backed by a reasonable reading of the law.
The Chicago-based Seventh US Court of Appeals has sided with the companies. The Seventh Circuit said pharmacy operators could not be held liable for fraud given the “objectively reasonable” interpretation of the law in their favor — even if they did not actually believe that interpretation.
President Joe Biden’s administration supported the whistleblower in their appeal to the Supreme Court. Administration attorneys urged the judges to reverse the Seventh Circuit, saying the ruling undermines the false claims law.
