Health Law Highlights

The Knowledge Requirement in a Case Alleging False Claims Act Violations

From PharmacyToday, by David B. Brushwood, BSPharm, JD:

This matter involved a pharmacy corporation accused of violating the FCA due to falsification of prior authorization (PA) forms by a Clinical Pharmacy Manager (CPM). The CPM allegedly completed these forms with false information, leading to coverage of Medicaid patients who did not meet criteria for payment. This resulted in a substantial increase in the pharmacy’s revenue from just over $1.5 million to over $5 million in 15 months.

The pharmacy corporation moved to dismiss its case, arguing that it was unaware of the CPM’s illegal actions.

The court denied the motion, noting that the FCA holds liable any person who knowingly presents or causes to be presented a false or fraudulent claim for payment. “Knowingly” is defined as having “actual knowledge”, “deliberate ignorance”, or “reckless disregard of the truth or falsity.”

The court reasoned that the corporation was aware of the significant increase in revenue, which was discussed between the CPM and her supervisor. Furthermore, the corporation’s bonus program, which incentivized higher sales, could have potentially encouraged the increase in revenue by any means necessary.

The takeaway is that pharmacy supervisors should be vigilant about any unexpected increase in pharmacy revenues and should confirm a legitimate explanation to prevent liability for knowingly allowing fraudulent activity. Any unlawful request must be reported to a supervisor, and rules must be adhered to for the benefit of the patients.