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United States Resolves False Claims Act Claims Against Rxamerica for Allegedly Submitting False Pricing Relating to the Company’s Medicare Part D Plan

October 15, 2012

In one of the first federal False Claims Act settlements involving a Medicare Part D plan, RxAmerica L.L.C. has entered into a civil settlement agreement with the United States in which it has agreed to pay the United States $5.25 million dollars to resolve allegations that it made false submissions to the Centers for Medicare & Medicaid Services (“CMS”) for use in a CMS online tool called the Medicare Prescription Drug Plan Finder (“Plan Finder”). The settlement was announced by Stuart F. Delery, Acting Assistant Attorney General for the Justice Department's Civil Division, and Loretta E. Lynch, U.S. Attorney for the Eastern District of New York.

As background, the Medicare program offers participants prescription drug coverage. For Medicare participants to obtain this drug coverage, they must join a Medicare approved plan, often referred to as a Part D plan. Medicare Part D plans can vary in both the drugs that they cover, the amount they reimburse for those drugs, and the deductibles and co-pays they require their participants to pay.

During the relevant period of time, there were four different Part D coverage phases: (1) an initial deductible phase; (2) a co-insurance phase, where Part D participants generally paid approximately 25% of the costs of their prescription drugs, and their plan paid 75% of those costs; (3) after a certain amount of costs were incurred during the co-insurance phase, Part D provided for a gap (frequently referred to as the “donut hole”), where Part D participants paid 100% of the costs of their prescription drugs; and (4) after the participants paid for a certain amount of their prescription drug costs themselves in the “donut hole,” they entered the “catastrophic coverage” phase, in which their plan, and ultimately the Medicare program, paid for almost all of the prescription drugs costs.

To assist participants to choose a plan that minimized their likelihood of entering the “donut hole,” the Plan Finder web-based tool allowed Medicare Part D beneficiaries to determine estimated prescription drug prices for each Medicare Part D plan that the beneficiary considered for enrollment. CMS obtained the pricing information that was contained on Plan Finder from data submitted to CMS by each Part D Plan sponsor.

This settlement resolves allegations made in two qui tam complaints against RxAmerica. Under the federal False Claims Act, a private individual who has uncovered fraud against the government may file suit on behalf of the United States. If the United States is successful in resolving or litigating those claims, the person who originally made the allegations may share in the recovery. Here, the whistleblowers who filed the complaints were Medicare Part D beneficiaries who chose the RxAmerica sponsored Part D plan after reviewing Plan Finder. One of the beneficiaries allegedly entered into the “donut hole” when he was allegedly charged approximately $250 a month for a drug that he expected to be charged only $50 a month. The whistleblowers further alleged that these pricing differentials likely caused other Part D beneficiaries to unexpectedly enter the “donut hole” and then the “catastrophic coverage” phase, causing losses to the Medicare Program.

Following its investigation into these allegations and their impact on the Medicare program, the United States reached its settlement with RxAmerica, in which it alleged that during the period January 1, 2007 to December 31, 2008, RxAmerica made false submissions to CMS regarding prices for certain generic prescription drugs used for Plan Finder, despite certifying to CMS that it would submit accurate pricing data for Plan Finder. As a result, RxAmerica allegedly received Medicare Part D payments for claims for the Covered Drugs at prices that in some cases were significantly higher than the pricing data RxAmerica submitted to CMS for use on Plan Finder. In settling this case, RxAmerica did not make any admissions regarding these allegations.

“The Department of Justice is committed to protecting the Medicare drug prescription program against all types of misconduct,” said Acting Assistant Attorney General Delery. “As today's settlement demonstrates, we will ensure that Medicare Part D sponsors submit accurate drug pricing information, to ensure the integrity of the Medicare Part D program and to protect the beneficiaries who participate in the program.”

“The health care choices facing Americans are complicated enough without patients being misinformed and forced to select a Part D plan based on false data. Those navigating our Medicare system deserve accurate information so they can make informed choices and obtain the benefits to which they are entitled. The Medicare system deserves honest input from plan sponsors, so it can continue to safeguard taxpayer dollars. Nothing less will suffice,” stated United States Attorney Lynch. Ms. Lynch added that “This case exemplifies our continuing dedication to combating all types of alleged health care fraud that can eat away at our precious public health care dollars.”

“The government pursued allegations that RxAmerica falsely advertised drug prices to Medicare Part D enrollees,” said Thomas O’Donnell, Special Agent-in-Charge of the New York Region of the Department of Health and Human Services Office of Inspector General. “Along with our law enforcement partners, we will aggressively pursue all those allegedly taking advantage of people receiving federal health program benefits.”

The government’s case was handled by Assistant U.S. Attorneys Paul Kaufman and Gail A. Matthews, Assistant Director Patricia Hanower of the Department of Justice’s Civil Frauds Branch, and Christina K. McGarvey, Senior Counsel of the Office of Counsel to the Inspector General of the U.S. Department of Health and Human Services, who were assisted by the Eastern District of New York’s Affirmative Civil Enforcement Auditor Emily Rosenthal.

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