Pharmaceutical Company Says Former Employee is Not "Original Source" of False Claims Act Allegations and Cannot Bring Whistleblower Suit

Wednesday, December 2, 2015
By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

Medco Health Solutions Inc. (Medco) asked a Delaware federal judge to dismiss a False Claims Act (FCA) lawsuit brought by former employee and vice president of the company's pharmaceutical contracting group.  Paul Denis brought the qui tam suit against Medco alleging the company defrauded state and federal insurance companies by hiding discounts it was receiving on drugs.  

Medco claimed Denis only has knowledge of these alleged non-disclosed discounts by way of company documents and discussions with colleagues within the company.  Therefore, Medco argued Denis has no standing to file an FCA suit where he does not possess firsthand knowledge of allegations of fraud or abuse per recent federal case law. 

Federal Case Law Sets the Precedent for Relators' Standing to Sue in FCA Cases.

In an effort to eliminate "parasitic lawsuits" while still encouraging private persons to blow the whistle on fraudulent activity, Congress added to the FCA a bar against suits brought after public disclosure has been made.  Graham Cnty. Soil & Water Conservation Dist. v. United States ex rel. Wilson, 559 U.S. 280, 295 (2010).  This bar places a requirement on a relator to be "an original source of the information."  Section 3730(e)(4)(A), 31 United States Code

In a U.S. Court of Appeals opinion filed on October 20, 2014, in U.S. ex rel. Schumann v. AstraZeneca Pharmaceuticals L.P., the court found that the district court was correct in dismissing with prejudice an FCA case due to lack of subject matter jurisdiction.  The court found that knowledge of fraud obtained from the review of documents and the discussion of the same with colleagues who participated in the events as relayed by the documents, did not constitute an "original source" status sufficient for an FCA claim.  U.S. ex rel. Schumann v. AstraZeneca Pharmaceuticals L.P., No. 13-1489 at 22 (3d Cir. Oct. 20, 2014).  This finding set a precedent now being relied upon by Medco in its request for a dismissal of Denis's FCA suit.  

To read the full precedential case, click here

Medco Further Claims Its Actions Fall Within "Safe Harbor."

Medco further claims that the alleged fraudulent discounts as described in Denis's Third Amended Complaint fall within the Anti-Kickback Statute's (AKS) safe harbor regulations.  These "safe harbor" regulations Medco referred to describe payment and business practices that may seem to implicate the federal AKS but are not treated as offenses under the statute.  To read more about "safe harbor" exceptions found in Section 1001.952, 42 Code of Federal Regulations, click here

Medco Has Been Here Before.

In October 2006, Medco agreed to pay $155 million to settle similar allegations of false claims to the government.  The government's complaint alleged (among other claims) that Medco violated the AKS by soliciting and accepting payments from pharmaceutical manufacturers to favor their drugs and by paying kickbacks to induce health plans to award it contracts.  To read the full press release issued by the Department of Justice (DOJ), click here

While the relator's complaint alleges that this is repetitive behavior for Medco, the pharmaceutical company claims for similar reasons that Denis has not met the FCA's "first to claim" requirement.  Medco argued that at the time Denis filed his FCA suit, a suit filed against AstraZeneca over the same alleged discounts was already pending.  

To read the full Third Amended Complaint, click here


Do you agree with the precedent set by federal case law as to the "original source" requirement in False Claims Act cases, or do you believe it encompasses too narrow of a scope for obtaining knowledge of fraud and abuse? 

Contact Health Law Attorneys Experienced with Qui Tam or Whistleblower Cases.

Attorneys with The Health Law Firm also represent health care professionals and health facilities in qui tam or whistleblower cases both in defending such claims and in bringing such claims. We have developed relationships with recognized experts in health care accounting, health care financing, utilization review, medical review, filling, coding, and other services that assist us in such matters. We have represented doctors, nurses and others as relators in bringing qui tam or whistleblower cases, as well.

To contact The Health Law Firm, please call (407) 331-6620 or (850) 439-1001 and visit our website at


Department of Justice.  "Medco to Pay U.S. $155 Million to Settle False Claims Act Cases."  Press Release.  23 Oct. 2006.  Web.  1 Dec. 2015.

Novak Jones, Diana.  "Medco Says Ex-Worker Can't Bring FCA Suit."  Law360.  Portfolio Media Inc.: 24 Nov. 2015.  Web.  1 Dec. 2015.

U.S. ex rel. Schumann v. AstraZeneca Pharmaceuticals L.P., No. 13-1489 (3d Cir. Oct. 20, 2014).

About the Author:
George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law.  He is the President and Managing Partner of The Health Law Firm, which has a national practice.  Its main office is in the Orlando, Florida area. The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.

Florida health attorney, qui tam lawyer, health law attorney, Florida health lawyer, The Health Law Firm, health law defense lawyer, health care fraud attorney, whistleblower attorney, AKS lawyer, Anti-Kickback Statute attorney, False Claims Act defense lawyer, FCA attorney, illegal kickbacks, DOJ settlement attorney, government health care fraud, health fraud and abuse allegations, health fraud attorney, FCA legal representation, relator attorney, FCA original source requirement, AKS safe harbor, FCA subject matter jurisdiction, FCA first to claim requirement

“The Health Law Firm” is a registered fictitious business name of George F. Indest III, P.A. – The Health Law Firm, a Florida professional service corporation, since 1999.

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