false claims act by submitting allegedly inflated prices on behalf of beneficiaries who were covered by the medicare prescription part d program he failed to do so and he now before this court and asks this court to excuse his failure of proof by essentially rewriting the false claims act rewriting it in a way that would allow it to extend to conduct where the later has not provided any evidence that the government did or even could have paid a single penny more and in fact has not even provided any relevant after the two thousand and nine fear of amendments the thrust me to the government money so where's the presentment requirement after two thousand and nine your honor as well as an initial matter i would say that there that it really is not the case that there is no doubt that this was government money there certainly is a chain that applies here and the relator has essentially asked this court to take judicial notice of that medicare part d structure what part of the structure do you think was not followed what did what relate or has one side but the kmart you know whatever the price was what reason is there to think that medicare part d wasn't operating properly your honor under this court's precedents in cruise i would suggest prove the way medicaid be works what the relator has to do is to come forth with credible evidence that wouldn't allow a jury to find that they have satisfied the essential elements of a claim i don't know doesn't really answer question and you don't contest that k mart submit scl aims to the pharmacy benefit managers and that they submit claims about prescription drug events to the plan sponsors and  plan sponsors this is all in regulations it's in the statute so you must be arguing either that the statutory scheme has broken down and that somehow something amiss is happening such that the government isn't really paying these claims because there's just of legal structure in place that shows how the claims flow there's evidence in the record to show how much is direct appropriation funds versus subscription amounts i don't understand why you think this and it's odd to me that you're focusing on this as as a point that you're trying to make part of the reason for the focus on this your honor is that this is a motion for summary judgment not a motion to dismiss no no no no i mean you have various arguments of course it's a motion for summary judgment totally understand out but they've shown how the program works and that what congress decided to do with part d was and list various private intermediaries but it's a government program people stand on the floor of congress all the time and complain about how much money is being funneled into pharmacy benefits it's you are you taking issue with with reports from the department of health and human services about how much it is absolutely true that kmart is not sending a bill to the department of health and human services or to c m s and saying please pay us there are various intermediaries and i think it would be more fruitful for you to talk about whether that makes any difference in particular in the coast two thousand and nine or whether that makes it so it does make a difference your honor because the essence of the false claims act is that liability attaches to the im even after the fear amendments directly in compass is the idea that there is some payment of money flowing from the government so that the definition of a claim include demand for money submitted directly to the government or a demand for money that is submitted to a contractor that where the government will in fact provide a portion of that money the writer and h m m not following why that isn't exactly what happens that there are contractors private entities that stand between kmart and c m s or whichever what is called c s and they're paying kmart isn't giving the drugs away to people it's getting paid and it's getting paid because it has submitted these claims to the contractors it has your honor but what we don't have is the evidence of exactly how those contracts work so there is money at the top of the pyramid it is doled out according to a contract with the plan sponsor that government money is then paid to a p b m for a number of different services which admitted y include the payment of prescription drug claims but include call centers and formulary management and a number of other things that p b m stu we don't know anything because relator chose not to get the evidence why about how that or it  the government doesn't even have to pay the full claim the language of the statute suggests that the government sort of contributes to i don't have the exact language right in front of me but the government has to just pay part of the central phrase or just looking at the program federal regulations i would think to see how medicare part b work your honor there has to be an impact on the government put me in mind of eighteen u s c six six six you know that statute it makes criminals certain activities involving any recipient of u s funds if you pay a bribe to somebody who receives u fund you can go to jail for a long time even though the government is not net out of pocket the federal funds define the scope of culpability and it looks like the false claims act after the two thousand and nine amend works the same one now maybe that's wrong but you need to explain why it's wrong rather than just assert your bottom line repeatedly your honor we would assert or argue that it is do you have an argument based on the language of the statute yes your honor the language of the statute in defining a claim post the two thousand and nine amendments specifically requires that the request or demand for that's what the us is going to provide any part of the money but the relator has not shown how that money flow works the relator has adjusted back to the proposition that it is somehow a matter for evidence how the medicare claims system works it is you're going to find it by looking at the statute or the federal register according to you what you have to put the secretary of health and human services on the stand to testify about what works no your hon but at least you would have to provide one contract with a plan sponsoring a p b m that says this plane sponsor receives a certain amount of money from the government that plan sponsor has an arrangement with  i could shift you to a different topic and i was o'neill and that's the question of the retroactivity of some of the two thousand and nine amendments if i understand your position the two thousand  amendments application would depend upon the date a particular payment was actually made by the government or the contractor correct that's correct so that if we had two claims for payment that are submitted fraudulently each submitted let's say on june first two thousand and eight one is paid on june sixth the other is paid on june ninth one is subject to the two thousand and nine amendments the other is not under your position ron why on earth would congress have done that when the two thousand and nine amendments were aimed at essentially erasing allison engine from the books while leaving intact closed judgments that congress can't constitutionally reopen your honor because they were are trying to erase allison engine as of june seven and say that on june eighth nine ten anything that happens there is not affected by that decision but they were could but the other problem i have with your retroactivity argument is that it seems to think that claims for reimbursement are submitted under the false claims act and cla reimbursement are not submitted under the false claims that there submitted under medicare are there submitted under medicaid or whatever other tri care of whatever other program so so you have an uphill battle i think when the language of the amendment is claim submitted pursuant to the f c a false claims act your honor we would argue that the under the false claims act is there to make clear that the definition of is there is no claim you don't say please let me have a false claim you know it's just doesn't make any sense it doesn't say claims as defined by the false claims act it doesn't say anything it just uses this word which means observed before it is somewhat ambiguous word a claim could be what you're saying and claim could be a case failure to state a claim upon which relief can be granted appears in rule twelve  six so the word claim means a lot of things we have to look at the context yes your honor but in this case the retroactivity provision is not codified in the united states code and therefore the reference to under the false claims act would would direct the reader specifically to the fact that the definition of claim that congress was intending was the definition of claim under the false claims act or  do that it would do that your honor precisely to get to the point the judge hamilton raised which is they were trying to wipe off allison engine on the books and therefore if there are claims that are still existing and are still active and that are subject to be paid they do not want allison engine to apply to any of those claims and so by saying that we are that we are focusing on the request or demand for money as defined in under the false claims act those are the claims that are going to be subject to our change in the law could ask you about your approach to the definition of the customer in the usual and customary prices  and can you direct us ms o'neil to what the record shows us about how many people actually pay what kmart says is the usual and customary price and how many people pay what related under the disco membership arrangements are usual and customary proceeds the record is admittedly unclear on that your honor which is part of the reason why we would say the district court could not have granted summary judgment for the relator on this point but there are i guess two pieces of evidence that are in the record first of all there is a statement by the relator expert dr hay in his expert report which the judge by district judge cites to in footnote ten of her order and that report says that there are ninety percent of the customers over the entire period th first of all it's important to note that what that says is that is there any just quickly a quick answer to judges to the contrary evidence would be the declaration of jason dukes which was submitted as well and which which is at page three zero three six of the record in and paragraph six of that declaration that says that not every customer paid the price now that it's not evidence contrary to the proposition that seventy percent or ninety percent were million dollars and do it justice proposition that out of a very large number of sales at least one customer i did not pay the discount rate so i ask again is there any evidence contrary to what professor found or said there is no evidence directly contrary to that but that evidence also does not measure in roman so so what is the  what are the factual issues that you think are relevant to this question and where did you identify them for this record your honor but the factual issues would potentially be the one roman aspects of kmart's program now we did not identify them as a meet that is the point your honor on whether on how exactly enrollment occurred was it that reliable form or why is that relevant if we know the bottom line of how many people quote enrolled and i'll let you answer that question i just have to say looking at this program reminds me of countless retail measures to give essentially discounts to certain people whether it's amazon prime and whether to barnes and noble card or whether it's your card for the grocery store that gives you some discount i mean this is not an uncommon business model it is not your honor it's similar to a b j's or a sam's club where you have to enroll in their club or amazon get a price already and so so anyone in the public who wants to and actually hear there's another point i gathered this was ten dollars right so if you factor the ten dollars in even the first prescription is cheaper so why would anybody not enroll if they know about it well mr weber in his deposition which is in the record indicated that you're joining a program and this is at page one of six of his deposition that you're joining a program which not post hip up but in the early days when this program started could subject you to marketing could mean that k mart has your information and some people just don't like to do that if it has been in the law for a long time  so i'm not sure that these are so their fear is a difference we would say in the price check the price charged to the general public and the price offered to the specific people who choose to enroll in the program and so our argument was if the if the relevant issue here for you in c is whether or not k mart charged that price to the general public it did not it offered that price only to the people who chose to know what's mature ariel that you have to actually fill out a form and go through a process when we know the bottom line is that it's undisputed that at least three quarters of the business is handled through those membership discounts again that is across the ten years in the aggregate not in any particular year that you come forward with this detailed information dispute that number over that in a particular year we did not want when did you identify these suppose of factual issues for the district court we identified those issues mr dr hayes deposition was taken approximately three or four days before the summary judgment argument and we identified those factual issues and the and what he said in his deposition to the district court in the oral argument i'm hearing so we're not going to find a document that identifies these are the disputed issues of fact they are not your honor because the question that the district judge decided and i'm only the issue we were arguing and it was that this isn't in roman program the facts are undisputed that there is in rome it different types of in roman but undisputed that there is in rome and the relator came forward with no evidence to dispute that they just simply said the enrollment process was not sufficient or good enough the judge that if they didn't tell you next they just said that that in this instance it doesn't cause the conclusion that these are not members of the general public such that usual and customary can apply i don't think anybody was complaining whether this nominal rollman where you give your name and address all the stuff that you have to give anyway to the pharmacy plus maybe pay ten bucks you know so that you can get a sixty dollars prescription for fifteen dollars so i don't think that there were was much of a reason to dispute the and the district court's decision turned on the fact that we didn't discriminate in allowing people to join the fact that we topic you this is the so called private clubs were obviously for a number of years a way of evading desegregation orders in the south and elsewhere and civil rights movement and you've been in your brief page forty four note thirteen you point out the whole lot of different factors had to enter into those judgments i went through those factors genuine selective we don't have that here memberships control over operations of the establishment you don't give your customers control over k mart history of the organization it's just that discounts use of facilities by nonmembers of course everybody gets to do that purpose first of all we would argue that they're not relevant because we're not trying to determine whether k mart could have discriminated against who could join it's club we are simply saying that once we in fact have a boil tea club is that group who has chosen to join the general public such that the price we charge them is our price to the general public but the purpose i think the purpose of this morial tea club would be one factor that would cut in our favor it's to offer prices to a less the entire cash paying public to purchase and secondly the use of it by nonmembers would also be a factor that would favor us because we would argue that there are people who do not you get this discount price and impact from you all to the relator is point that at a minimum the false statements were capable of influencing key mort's receipt of money or property yes your honor this would go back to our argument that that money needs to be money that has flowed down from the government and the relator has not given any evidence that would suggest that the money k mart received was government except that it is paid to a sub sub contractor within a government program and there's no limiting principle to that your honor thank you thank you i appreciate thank you very much mr king please the court the district courts to dial summary judgment should be affirmed for five reasons first kmart submitted approximately two thirds of the party claims at issue here after the case that isn't affected but rather the other corrupt ok correct under the post two thousand and nine amendments version of the false claims act presentment to an officer or employee of the united states government distinguishing is what's the difference between the money that slows down to k mart in the on the one side and the money that i get from the federal government once a month and then i go out and spend it as i wish certainly the people who i patronize are not people who are bennett i mean they are been benefiting from federal funds to the extent that decides that's money there but what's the difference between those two cases the differences a couple of things of course the supreme court and the allison engine decision in two thousand and eight didn't see a difference between those two things but when congress amended the false claims act in two thousand and nine it amended advance a government program or interest that distinguishes it from the paycheck you receive each month because you receive that money it becomes yours with you for you to do with as you please h what's changed from personal salaries which are addressed in the statute to contractors payments and lets say i'm i run a highway contracting business and i've got a sub sub contractor for a partially federally funded highway project and turns out we got some electrical problems in our office and we bring in an electrician and had the electrician submits a false bill is that covered by the false claims act it is now enough in the wake of allison engine the supreme obviously not but you think it is now yes and the reason is because that's exactly what congress intended to wipe off the books allison engine contractor a federal firearms contractor or other recipient of federal funds a claim made to a contractor or recipient of federal funds if those funds or to be  for it to advance a government program their interests are being used to repair my office where i manage a number of contracts including a federal government funded project maybe i misunderstand your i'm wondering whether you're trying to say that once the funds go to the contractor to build the highway let's say that you somehow have to keep a chain of custody for the s so that those dollars go only to the highway that's one option or once that person receives those funds as long as they're working on the highway projects anything they get whether it's office overhead whether it's buying snacks for your office staff whether it's buying concrete for the highway it's so i guess there are two ways of looking at what happens once you get those federal grant dollars for the highway program well using the facts of allison engine the request of the sub contractor to be paid by the contractor the ship builder that is a false client because it is made on a contractor who was in the possession of federal funds that are to be diverted to dispersed use for the federal program to build should the question would be is the office repair of the electrical system heart of the federal project or does it have to be actually more directly contractor you know you'd have to fix your office even if next year you don't have the highway contract anymore right just the general overhead as it is general contractors personal business office and it's not a government  and if i understand the facts that you're posing correctly that is not a those funds are being used to advance a government program or interest to that's that's the key statutory language to provide a limitation as you understand i think the language that congress adopted in one nine hundred eighty six and the language that it then tweaked and that and two thousand and nine are both crucial here because the language in one nine hundred eighty six defining a claim also said that a contractor grantee or other recipient of federal funds a claim on a contract or grant to your other recipient of federal funds is  claim within the meaning of the false claims act right so that's very the hypothetical supposed kmart's should midget's view of usual customary charges to blue cross which is administrating an employer's welfare plan tax expenditure designed to subsidize employer provided medical care it strikes me and i'm not sure that i can articulate the reason that right now that that is a bridge too  when you're talking about a subsidy of that sort of tax break you're not talking about federal funds that have flowed from the general treasury the u s treasury or any one of the government's accounts to a contractor grantee or other recipient and that's essential under the definition of a client and that's what was essential to the definition of a claim under the one nine hundred eighty six version of the statue and it's still part of that statute which adds that those funds that have to flow from the government to the contractor grantee or other recipient have to be used to advance a government program or interest and it seems to me that the arista hypothetical that you proposed just simply doesn't match that language and i have some difficulty seeing why a tax break is not a government program designed to advance a government goal but the question of course if you really want me to suppress the hypothetical i would say suppose this becomes the basis for a refund go ok and the government sends a tax refund check to the employer but the result  tax refund would not be federal funds put into the hands of a contractor grantee or other recipient for the purpose of those funds being used to advance a government program or government of course you know you could argue that a tax refund is just you a different question is it necessary in your view for us to worry about whether these intermediaries or the government if we were to agree with you on the  great me that the statute draws a distinction between things that are the government and things that are contractors or subcontractors your sub sub contractors that's right unfortunately i think it is an issue that you will have to reach because from the time period from january when the party program began on january one two thousand and six so there was a period of time even if you found the former aide to to have been effective only and amended on june seventh two thousand and eight and to apply to cases going forward from that date you would still have the period there's still something about how many presentment or caused to be presented present or cause to be presented so how do you interpret the latter phrase cause to be present right well two ways there are there are two different kinds  of false claims at play here and we have been focused this appeal has caused us to focus on the false claims that kmart's and that's to plan sponsors and pharmacy benefit managers but as counsel has correct i'm hoping yes ok good the prescription drug event is a document that is created electronically that just means you got a prescription was filled right now means that a part b claim was paid and that somebody doesn't get their blood pressure medicine or something that's a prescription drug event correct and that's forwarded on to c m s and we maintained this has not been an issue in the briefing our own appeal but in the district court  when we were addressing this argument we argued to the court that the p d is a claim it is a false claim and the reason that it's a false claim is because it reports what the plan sponsor or or pharmacy benefit from manager paid on a particular prescription so when you get used to this in this massive paperwork that goes to all these different people i take it there is some place perhaps just when when does it's actually not paper it's all electronic tuesdays it isn't and it is a field in an electronic form it actually has a designation it's called for twenty six the key here it is the usual and customary field was just the cash customers who were not in the program right it's not the people who have insurance and so on so it's already a subset right or standing right it was the price that almost nobody ever pa if we agree with you on the retroactivity of the two thousand and nine amendments applying to pending cases he said that would still leave some of your claims preachy two thousand and nine subject to a statutory presentment where me so right yes ok are any of those claims soley under a one or do they also with the same with the same claims also be deemed f the the allison engine case at least with respect to the a to client and wiping it from the books that that argument simply can't be made with respect and eye to quoting then you have to deal with the fact that it makes the statute strike that with respect to a two there is no problem with respect to a two there is no problem it's only with respect to a one that there would be a potential i understand that my question is whether there are any parts of i mean dollars in the relief you are seeking that depend upon an a one present  then everything and i never do that with respect to the eight you claim if you find that that rector activity approved provision applies to cases or yes another way of looking at it is to aid to claims that were pending on or after june seventh two thousand and eight yeah that covers all of the eight to claims so what else is there there is the a one claim and i'm it's not necessary i'm trying to get what i'm trying to get you to tell me is whether the one is redundant in essence as applied to those coins in the context of this case i think it would be redundant it is the belt and suspenders approach of lawyers to include a one and a two or i to i have some sympathy with the supreme court's textual analysis and allison engine coming in with resentment requirements under a one but if but also congress has made its views reasonably clear w making of a false statement a record to get a false claim paid you know it's not always the case that a false claim will involve a false statement or false record is there a specific intent requirement for  today i would say if you were signed up for a program like that it's most likely but you'd be inundated with e mails from kmart or whoever whoever is programmed implies that maybe that wasn't the case back in two thousand back when these programs began you know think there are a couple things about that the enrollment and the kmart talks about and in this context it really is as you said during the earlier during the argument that the enrollment consisted of providing the kind of basic demographic information that a customer would have to provide to get his prescription filled anyway so why any evidence of the sea was ever more than ten dollars not in fact there is evidence i'm not sure that it's in this record first of all there wasn't a fee in two thousand and six seven eight and nine kmart started charging the feeling however not really because with one hand it took the ten dollars fee with another it gave a ten dollar coupon back to the customer and it did that through the end of august two thousand and eleven i believe and those dates are somewhat because this case was under seal in two thousand and nine but the government was investigating the claims and it served a subpoena on kmart the timing is curious it suggests to us at least that kmart started charging the fee but giving it back to the customer in the form of a coupon because they knew something was afoot and the government was looking into its program after this case was unsealed than in two thousand and ten late two thousand and ten in two thousand and eleven kmart decided it would better quit giving that coupon back and make it a real ten dollars fee so the evolution of how that fee came into existence in this case is interesting because i think it demonstrates between that and the enrollment which is not really any enroll meant in fact one of kmart's own witnesses testified i believe it's in one of the footnotes in our brief that there really is no difference between between saying i want to enroll in the program and i want to cheaper products the only reason the kmart says this is a club which by the way is not what it said for many years and it would justify not giving discount prices to other third party payers it got inquiries from insurer private insurers like i think where he's from michigan medicaid and i just lied about it and you know in the early years i was telling private parties or third party payers that it was a secondary insurance program and all of kmart's testimony witnesses have testified in this case this is an insurance of course it's not  o the only reason there is a quote unquote the only purpose of the club is to allow kmart to charge the government and private insurers as well  others that have similar prices there's no evidence i remember reading about that but on the other hand if you can prices for me and charge some people higher price well and that's exactly what they've done is  charge the five ten and fifteen dollars in order to compete with the wal marts and targets and other walgreens of the world while at the same time trying to maintain a usual  customary price that it can charge to when there's insurance involved when there's a deep pocket to pay the price is always higher many times shockingly higher and by the way you know the you know the dire claims about what this means for the c m s hold out wal mart as an example of the company that does it right it charges four dollars for its thirty day prescription and when there's a party insurance it charges the customer a one dollar co pay and part b pays two dollars and fifty cents on that so you know it's not true that everybody is doing it it's not true that there are dire consequences for the industry there are companies who are doing it right one point that i would like to address quickly as quickly as i can it's not true that we have not put together evidence in this case about how the part d program works aside y benefit management industry and the last eighteen years her firm pharmacy outcome specialist has provided a variety of services including to the department of defense and the office of personnel management having to do with these very kinds of issues and she and her report which is in the record at c c f number two eighteen dash nine at page six and eight of her report she lays all the south we do have a fact witness now i suspect when we get ready to go to trial there will be a motion in limine that says she's testifying to issues of law we've got it covered one way or the other because we have unimpeachable sources for instance the trustees the medic medicare trustees and annual reports the h h s your honor even if the court were to agree on the retroactivity point that eighty two applies those false statements must be material to the false or fraudulent claim and the claim is the thing that is paid for with money from the government and so we would argue that you still need to address the materiality point across the board the evidence that mr king just referred to is evidence that lays out again the hypothetical structure of the evidence about what percentage of that money might go to a p b m a pharmacy benefit manager particularly for the provision of pharmacy reimbursement of pharmacy claims versus the other services certainly does not testify and provide any evidence on the portion of that money that actually goes to pay it claims submitted by k mart thank you very much