UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

UNITED STATES OF AMERICA, ex 

rel. MARC SILVER, et al.,

 Relators,

v.

OMNICARE, INC., et al., 

 Defendants.

1:11-cv-01326-NLH-AMD 

OPINION

Appearances:

RUSSELL D. PAUL

WILLIAM H ELLERBE

BERGER MONTAGUE PC

1818 MARKET STREET

SUITE 3600

PHILADELPHIA, PA. 19102

LISA J. RODRIGUEZ

SCHNADER HARRISON SEGAL & LEWIS LLP

WOODLAND FALLS CORPORATE PARK

220 LAKE DRIVE EAST, SUITE 200

CHERRY HILL, N.J. 08002-1165

DANIEL WILLIAM MEYLER

U.S. ATTORNEY'S OFFICE

DISTRICT OF NEW JERSEY

970 BROAD STREET, SUITE 700

NEWARK, N.J. 07102

On behalf of Relators

JUDITH H. GERMANO

GWEN M. SCHOENFELD

GERMANO LAW LLC

460 BLOOMFIELD AVENUE, SUITE 200

MONTCLAIR, N.J. 07042

On behalf of Defendant PharMerica Corporation

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HILLMAN, District Judge 

Pending before the Court are Relator Marc Silver’s 

(“Relator”) motions to exclude the expert opinions of Louis F. 

Rossiter, Ph.D., (ECF 636), and Eric Hines, (ECF 639); Defendant 

PharMerica Corporation’s (“PharMerica”) motions to exclude the 

expert opinions of Kenneth W. Schafermeyer, Ph.D., (ECF 641), 

Allison K. Hoffman, (ECF 642), and Israel Shaked, Ph.D., (ECF 

656); and the parties’ joint motion to seal, (ECF 675). For the 

reasons expressed below, Relator’s motions will be denied, 

PharMerica’s motions will be granted in part, and the parties’ 

joint motion to seal will be granted in part. 

I. Background 

The facts and procedural history of this case have been 

recited in prior opinions of the Court and will not be reviewed 

in detail here. Sufficient for purposes of the pending motions, 

Relator filed a qui tam action against multiple defendants on 

behalf of the United States in March 2011, alleging violations 

of the False Claims Act (“FCA”). (ECF 131 at 2-3). Relator 

amended the complaint a fourth time as recently as April 2021. 

(ECF 548). 

As Relator succinctly summarized in his briefing for the 

pending motions, Skilled Nursing Facilities (“SNFs”) contract 

with providers such as PharMerica to supply prescription drugs 

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for patients, including those covered by Medicare Parts A and D 

and Medicaid. (ECF 640 at 1). Relator alleges that, from 2005 

to 2014, PharMerica offered below-cost and commercially 

unreasonable pricing for the Part A patients of 1741 SNFs in 

exchange for the right to service the facilities’ higher volume 

of patients insured by more profitable Part D and Medicaid 

programs. (Id. at 1-2). Relator alleges that this “swapping” 

scheme violated the Anti-Kickback Statute (“AKS”) and FCA. 

(Id.) 

On April 14, 2022, the Court granted PharMerica’s motion to 

bifurcate the parties’ Daubert and summary judgment motions. 

(ECF 627). The parties thereafter filed motions, (ECF 636; ECF 

639; ECF 641; ECF 642; ECF 644; ECF 656), and related 

oppositions and replies to exclude one another’s expert opinions 

and testimony. The relevant substance of these expert opinions 

will be discussed below. 

II. Discussion 

A. Subject Matter Jurisdiction 

The Court possesses original jurisdiction over Relator’s 

claims stemming from the FCA and AKS. See 28 U.S.C. § 1331. It 

has supplemental jurisdiction over Relator’s state-law claims. 

1 The parties’ briefing refers to both 174 and 175 SNFs being at 

issue in this case. PharMerica attributes this inconsistency to 

a mistaken misclassification in Shaked’s report. (ECF 656-1 at 

¶ 3 n.3). 

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See 28 U.S.C. § 1367(a). 

B. The FCA and AKS 

An individual who knowingly presents or causes to be 

presented a false or fraudulent claim for payment or approval or 

knowingly makes, uses, or causes to be made or used a false 

record or statement material to a false or fraudulent claim is 

liable to the United States under the FCA. See 31 U.S.C. § 

3729(a)(1)(A)-(B). The FCA is intended “to reach all types of 

fraud . . . that might result in financial loss to the 

Government.” United States ex rel. Petratos v. Genentech Inc., 

855 F.3d 481, 486 (3d Cir. 2017) (omission in original) (quoting 

Cook Cnty. v. United States ex rel. Chandler, 538 U.S. 119, 129 

(2003)). “A claim is legally false when it does not comply 

‘with a statute or regulation the compliance with which is a 

condition for Government payment.’” Id. (quoting United States 

ex rel. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 305 

(3d Cir. 2011)). 

This Court has acknowledged that compliance with the AKS is 

a precondition of payment for Medicare and Medicaid claims. See 

United States ex rel. Silver v. Omnicare, Inc., No. 11-1326, 

2021 WL 9848445, at *8 (D.N.J. Apr. 13, 2021) (collecting 

cases). The AKS establishes criminal penalties for the knowing 

or willful direct or indirect offer or payment of remuneration 

to induce referral for the furnishing or arrangement of 

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furnishing of an item or service that may be paid in whole or in 

part under a federal healthcare program or the purchase, lease, 

order, or recommendation thereof of a good, facility, service, 

or item which may be paid in whole or in part under a federal 

healthcare program. 42 U.S.C. § 1320a-7b(b)(2); see also 42 

U.S.C. § 1320a-7a(a)(7) (establishing civil penalties relating 

to the violation of § 1320a-7b(b)). 

C. Expert Opinion 

“Federal Rule of Evidence 702 imposes an obligation upon a 

district court to ensure that expert testimony is relevant and 

reliable.” In re Johnson & Johnson Derivative Litig., 900 F. 

Supp. 2d 467, 493 (D.N.J. Oct. 26, 2012) (citing ZF Meritor, LLC 

v. Eaton Corp., 696 F.3d 254, 291–92 (3d Cir. 2012)). Pursuant 

to the Rule, “[a] witness who is qualified as an expert by 

knowledge, skill, experience, training, or education may 

testify” if their “scientific, technical, or other specialized 

knowledge will help the trier of fact to understand the evidence 

or to determine a fact in issue”; their testimony is based on 

sufficient facts or data and reliable principles and methods; 

and the expert has reliably applied those principles and methods 

to the facts of the case. Fed. R. Evid. 702. District courts 

exercise considerable discretion in admitting or excluding 

expert opinion and testimony. See Pineda v. Ford Motor Co., 520 

F.3d 237, 243 (3d Cir. 2008) (noting that district courts’ 

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decisions to admit or exclude expert testimony are reviewed for 

abuse of discretion). 

The Third Circuit Court of Appeals has imposed a “trilogy 

of restrictions on expert testimony: qualification, reliability 

and fit.” Langbord v. U.S. Dep't of Treasury, 832 F.3d 170, 194 

(3d Cir. 2016) (quoting Schneider ex rel. Estate of Schneider v. 

Fried, 320 F.3d 396, 404 (3d Cir. 2003)). Qualification 

requires that the witness possess specialized knowledge, skills, 

training, or expertise. Krys v. Aaron, 112 F. Supp. 3d 181, 189 

(D.N.J. June 12, 2015) (citing Schneider, 320 F.3d at 404). 

Reliability demands “that the testimony be based upon ‘the 

“methods and procedures of science” rather than on “subjective 

belief or unsupported speculation”’ and that the expert have 

‘“good grounds” for his or her belief.’” Id. (quoting Calhoun 

v. Yamaha Motor Corp., U.S.A., 350 F.3d 316, 321 (3d Cir. 

2003)). Finally, fit is a “‘helpfulness’ standard” that refers 

to the testimony’s relevance and ability to assist the 

factfinder. Id. at 190 (citing Schneider, 320 F.3d at 404). 

The proponent of the expert testimony bears the burden of 

establishing each requirement by a preponderance of the 

evidence. Ford v. Ford Motor Co., 311 F. Supp. 3d 667, 673 

(D.N.J. Oct. 27, 2017). 

An expert’s opinion may be based on facts or data that the 

expert personally observed or was made aware of, and such facts 

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and data need not be admissible in order to be relied upon, 

though otherwise inadmissible facts or data may not be disclosed 

to the jury unless their probative value substantially outweighs 

their prejudicial effect. Fed. R. Evid. 703. Further, an 

expert opinion is not objectionable merely “because it embraces 

an ultimate issue,” Fed. R. Evid. 704, particularly if a proper 

foundation and explanation has been set and the factfinder may 

otherwise “be left hanging if the witness cannot cap off the 

testimony with a conclusion about the ultimate issue to which 

the expert is testifying,” Krys, 112 F. Supp. 3d at 192 (quoting 

3 STEPHEN A. SALTZBURG, MICHAEL M. MARTIN & DANIEL J. CAPRA, 

FEDERAL RULES OF EVIDENCE MANUAL § 704.02[1] (9th ed. 2006)). 

Courts have, however, struck expert opinions when they have 

impermissibly concluded whether a legal standard has been met. 

See City of Millville v. Rock, 683 F. Supp. 2d 319, 329 (D.N.J. 

Jan. 12, 2010) (collecting cases). 

Expert opinions, despite specialized rules and standards, 

are still evaluated by the same relevance and prejudice 

standards as other evidence. “[O]ne of the fundamental 

requirements of expert testimony is ‘relevance,’ which should be 

evaluated under the standard expressed in” Federal Rule of 

Evidence 401, Argush v. LPL Fin., LLC, Nos. 13-7821, 14-955, 14-

956, 2017 WL 349378, at *2 (D.N.J. Jan. 23, 2017) (citing United 

States v. Ford, 481 F.3d 215, 218 (3d Cir. 2007)), which itself 

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states that evidence is relevant if it has any tendency to make 

a fact of consequence more or less probable, Fed. R. Evid. 401. 

Similarly, district courts must ensure that expert testimony 

satisfies the standard of Federal Rule of Evidence 403, see 

United States v. Williams, 974 F.3d 320, 358 (3d Cir. 2020), 

which permits the exclusion of relevant evidence if its 

probative value is substantially outweighed by the risk of 

unfair prejudice, confusing issues, misleading the jury, undue 

delay, wasting time, or needlessly presenting cumulative 

evidence, Fed. R. Evid. 403. 

III. Analysis 

A. Relator’s Motion to Exclude the Opinions of Rossiter (ECF 

636) 

Relator challenges two opinions offered by Rossiter. 

First, Relator seeks to exclude Rossiter’s opinion regarding 

fair market value within the long-term care (“LTC”) industry. 

(ECF 637 at 6-16). Second, Relator asserts that Rossiter’s 

opinion concerning the impact, or lack thereof, of Part A 

pricing on Part D is contrary to law and therefore unreliable. 

(Id. at 16-31). The Court rejects both challenges. 

In Opinion 1 of his report, and preceding summary thereof, 

Rossiter discusses the highly competitive nature of the LTC 

market, the high number of participants and low barrier to 

entry, the sophistication of participants, and the inability of 

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pharmacies, like PharMerica, to unilaterally set rates. (ECF 

637-1 at ¶¶ 14, 36, 38). Rossiter opines that Part A per diem 

rates represent the natural and expected outcome of that 

competition among willing buyers and sellers – and therefore 

fair market value – and further that PharMerica’s policies, 

practices, and actions were consistent with that of a profitmaximizing entity and that “given the nature of the regulatory 

and competitive environment for LTC Pharmacies, low profit 

margins for their Medicare Part A contracts are not only 

unsurprising but expected.” (Id. at ¶¶ 36-37). 

Relator contends that Rossiter’s opinions run counter to 

reports, administrative guidance, and other evidence that the 

LTC market was “permeated” by illegal swapping and thus prices 

set in such a market cannot represent fair market value. In 

support of this proposition, Relator heavily relies on 

PharMerica’s own appellate brief, which recognized 

administrative and media reports of swapping within the nursing 

home industry, a report by the Lewin Group discussing LTC 

pharmacies’ ability to provide extensive services at little to 

no charge while maintaining positive margins, and the prominence 

in the market of PharMerica and its competitor, Omnicare, Inc. 

(“Omnicare”). (ECF 637 at 7-9; see also Br. of Appellee, United 

States ex rel. Silver v. PharMerica Corp., No. 16-4418, 2017 WL 

3448226, at *23-27 (C.A.3)). 

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Relator also points to a February 2010 letter from 

PharMerica to the Office of the Inspector General (“OIG”) 

seeking an advisory opinion while acknowledging that its 

“competitors, in order to gain SNF customers in certain markets, 

increasingly [we]re offering below cost, per diem pricing for 

pharmaceutical products and pharmacy services provided to the 

SNF’s Part A residents,” PharMerica had to match or beat 

competitors’ Part A pricing to remain competitive, and it had 

been reluctant to do so given such practices’ potential 

implication of the AKS. (ECF 637 at 10-11; ECF 637-4 at 5). An 

advisory opinion was not issued due to an investigation or 

proceeding involving the same or substantially the same actions. 

(ECF 637-5). Finally, Relator cites Omnicare’s $124-million 

settlement relating to conduct that overlapped in time with the 

allegations here, (ECF 637 at 12-13; see also Press Release, 

Dep’t of Just., Nation’s Largest Nursing Home Pharmacy Company 

to Pay $124 Million to Settle Allegations Involving False 

Billings to Federal Health Care Programs (June 25, 2014) 

(available at https://www.justice.gov/opa/pr/nation-s-largestnursing-home-pharmacy-company-pay-124-million-settleallegations-involving)), deposition testimony from PharMerica’s 

Donovan Bentley stating that Part A pricing at or below costs 

was common, (ECF 637 at 11-12; see also Bentley Dep. Tr. at 

25:18 to 26:5), and Rossiter’s testimony indicating that he was 

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unfamiliar with – or did not consider – some of the above 

documents and acknowledgement that per diem pricing in an 

illegal market would produce an illegal fair market value, (ECF 

637 at 15; see also Rossiter Dep. Tr. at 56:16 to 57:19, 63:5-

24). 

First, the Court notes that Relator’s brief relies on 

United States ex. rel. Gale v. Omnicare, Inc., No. 1:10–cv–127, 

2013 WL 3822152 (N.D. Ohio July 23, 2013), for the proposition 

that “the standard for illegal remuneration cannot be based upon 

a comparison to competitors’ prices because ‘if the industry 

were permeated with these swapping practices, then all companies 

might be engaging in kickbacks.’” (ECF 637 at 13 (quoting Gale, 

2013 WL 3822152, at *6 n.66)). This characterization of Gale 

paints an incomplete picture in the Court’s eyes. The cited 

footnote discusses the relative shortcomings of Omnicare’s 

position that the baseline for determining whether price 

reductions were offered should have been fair market value while 

the relator preferred using Omnicare’s usual and customary rate. 

See Gale, 2013 WL 3822152, at *6, 6 n.66. The court noted that, 

under Omnicare’s proposed standard, absurd results could ensue 

if the industry were permeated by illegal swapping – including 

anything short of servicing Part A patients for free in exchange 

for referrals. Id. at *6 n.66. The Court does not read this 

hypothetical flaw as a rejection of fair market value or 

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acknowledgment of actual permeation of illegal swapping within 

the market. Persuasively, despite this identified flaw, the 

Gale court concluded that “Omnicare's [standard] more closely 

approximates the statute's intent” and that “Omnicare's Usual 

and Customary price would be evidence of the fair market value, 

but so would the prices charged by Omnicare's competitors.” Id. 

at 6; see also U.S. ex rel. Jamison v. McKesson Corp., 900 F. 

Supp. 2d 683, 699 (N.D. Miss. Sept. 28, 2012) (“In the context 

of the AKS, courts use ‘fair market value’ as the gauge of value 

when assessing the remuneration element of the offense.”). 

More directly, the Court is not satisfied that Relator has 

established with the sources cited that the LTC market was 

permeated with illegal swapping to the extent that Rossiter’s 

opinions as to fair market value must be excluded. Relator 

certainly demonstrates that illegal swapping has occurred and, 

to the extent that the sources cited are otherwise admissible, 

it seems to the Court that the issues and sources cited in 

Relator’s brief would be appropriate subjects for crossexamination of Rossiter. However, the Court holds that Rossiter 

is not obligated to adopt Relator’s characterization of the LTC 

market and presume unbridled, illegal swapping. See Walker v. 

Gordon, 46 F. App’x 691, 695-96 (3d Cir. 2002) (“An expert 

is, nonetheless, permitted to base his opinion on a particular 

version of disputed facts and the weight to be accorded to that 

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opinion is for the jury. It is also, as the District Court 

observed, a proper subject for cross-examination.” (citing 

Stecyk v. Bell Helicopter Textron, Inc., 295 F.3d 408, 414 (3d 

Cir. 2002))); see also Arconic Corp. v. Novelis Inc., No. 17-

1434, 2023 WL 2403916, at *3 (W.D. Pa. Mar. 8, 2023) (permitting 

a damages expert to assume that an antitrust violation was 

committed); E.E.O.C. v. FAPS, Inc., No. 10–3095, 2014 WL 

4798802, at *7 (D.N.J. Sept. 26, 2014) (finding that a challenge 

to an expert based on facts not considered “relate[d] to 

questions of credibility or weight, not to the issue of 

admissibility.” (citing Walker, 46 F. App’x at 695-96)). 

Excluding Rossiter’s opinion would require characterizing the 

facts as presented by Relator, which the Court declines to do. 

The Court rejects Relator’s arguments concerning Rossiter’s 

opinion as to Part A and Part D pricing for similar reasons. In 

his report, Rossiter opines that the amount paid to PharMerica 

for Part A does not impact whether or how much is paid by the 

government for Part D or Medicaid. (ECF 637-1 at ¶¶ 16, 108). 

This opinion is based on the separate payment systems for Part A 

and Part D and the lack of information on Part A payments and 

rates that reach the government, the fact that Part D payments 

are made to plan sponsors as opposed to LTC pharmacies, and that 

Part A and state-level Medicaid programs similarly operate 

across distinct and separate payment systems. (Id. at ¶¶ 109-

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114). 

Relator responds that these opinions are contrary to law 

and therefore are unreliable and inadmissible. Relator’s 

challenge does not address the separateness of Part A, Part D, 

and Medicaid payment systems, but rather asserts that Part D 

sponsors seeking direct payment from the government must agree 

to comply with federal laws and regulations and ensure such 

compliance from downstream entities and that PharMerica entered 

into contracts that contained certifications of such compliance. 

(ECF 637 at 19 (citing 42 CFR § 423.505(h)(1), (i)(3)(iv), 

(i)(4)(iv))). Claims that have violated the AKS are not payable 

under Part D, Relator notes, citing the Court’s previous 

acknowledgement “that compliance with the AKS is a precondition 

to the payment of Medicare and Medicaid claims,” (id. at 22-23 

(quoting ECF 544 at 21)), and numerous courts in and outside the 

Third Circuit that have held that compliance with the AKS is a 

precondition of Medicare payment and therefore affects whether 

the government will reimburse, (id. at 26-30 (collecting 

cases)). Payment systems are thus intertwined, contrary to 

Rossiter’s opinion, when an illegal kickback in one program is 

used to garner a referral for another. (Id. at 30). 

Again, acceptance of Relator’s argument requires the 

assumption that PharMerica violated the AKS in order to receive 

the right to service the SNFs’ patients insured under Part D and 

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Medicaid. Rossiter was not required to make that assumption, 

see Walker, 46 F. App’x at 695-96, and therefore was also not 

required to detail the effect violation of the AKS would have on 

government reimbursements. To the extent that Relator contends 

that Rossiter’s opinion is inaccurate or incomplete, the Court 

holds that cross-examination is the appropriate means to 

challenge as opposed to exclusion of the opinion. 

B. Relator’s Motion to Exclude the Opinions of Hines (ECF 639) 

Relator next seeks to exclude from Hines’s expert report 

aggregate, gross-margin data and related analyses concerning the 

performance of groups of SNFs along with a related exhibit. 

(ECF 640 at 6). The relevant portions of Hines’s report analyze 

the 174 SNFs in aggregate for the years 2007 through 2014 and 

state that the overall weighted gross margin for the SNFs was 

17.2% over the period, with many individual homes also grossmargin positive and overall revenue exceeding costs in all but 

one quarter. (ECF 640-3 at ¶¶ 12, 92-93). Hines thereafter 

provides similar aggregate gross-margin data, rate-reset 

figures, and anecdotal information by three categories of SNFs: 

the seventeen facilities acquired through ChemRX’s bankruptcy, 

the twenty-three facilities from Skilled Healthcare home group, 

and the remaining 134 homes – with additional discussion of 

subgroups within those categories. (Id. at ¶¶ 98, 101-11). 

Exhibit A of the report provides per diem date ranges, rates, 

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number of rate resets, term length, and annual and aggregate 

gross-margin information for the 174 SNFs. (Id. at p. 15-18). 

Relator contends that Hines’s gross-margin analyses 

measuring profitability are flawed as they only consider the 

costs of the drugs themselves and not other, variable costs that 

would affect profitability such as those for labor and delivery. 

(ECF 640 at 7-8). Relator identifies multiple issues with Hines 

not including variable costs in his analyses, including courts’ 

and OIG’s recognition of analyses factoring in variable costs; 

PharMerica’s own consideration of labor, debt, and other costs 

in profit-and-loss statements; Hines’s acknowledgment of such 

costs; and Relator’s contention that Hines’s primary reason for 

using gross margin – that it is the primary accounting method 

used by PharMerica – is not justified when it is used in an 

allegedly unlawful scheme. (Id. at 16-22). Contribution-margin 

analyses, which account for variable costs and were utilized by 

Relator’s expert – Shaked, are approvingly recognized in 

academic literature, according to Relator. (Id. at 8-12). 

PharMerica counters that Relator’s challenge is based on an 

asserted superiority of contribution margin, which it says is 

incorrect and not required. (ECF 667 at 10-11). PharMerica 

does not dispute that it accounted for costs beyond those of 

drug ingredients. (Id. at 17). However, it submits that such 

costs were not identified at the individual SNF level, but 

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rather the pharmacy level. (Id. at 17-19). 

The Court agrees with PharMerica that Relator’s challenge 

boils down to the asserted superiority of Shaked’s contributionmargin analyses versus Hines’s gross-margin analyses. Even if 

the Court were to agree with Relator that contribution margin is 

superior, “admissibility is not based on whether an expert's 

‘opinion has the best foundation, or even whether the opinion is 

supported by the best methodology or unassailable research.’” 

UGI Sunbury LLC v. A Permanent Easement for 1.7575 Acres, 949 

F.3d 825, 834 (3d Cir. 2020) (quoting Karlo v. Pittsburgh Glass 

Works, LLC, 849 F.3d 61, 81 (3d Cir. 2017)). For expert 

testimony to be reliable, and therefore admissible, it must be 

based on a reasonable method, not necessarily the best method 

available. See Lentz v. Mason, 32 F. Supp. 2d 733, 746 (D.N.J. 

Jan. 11, 1999). 

The administrative and out-of-circuit authorities cited by 

Relator do not compel a different result. First, these 

authorities are not binding here. See 42 C.F.R. § 1008.53 (“An 

advisory opinion issued by the OIG will have no application to 

any individual or entity that does not join in the request for 

the opinion.”); Daubert v. NRA Grp., LLC, 861 F.3d 382, 395 (3d 

Cir. 2017) (“A decision of a federal district court judge is not 

binding precedent in either a different judicial district, the 

same judicial district, or even upon the same [district] judge 

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in a different case.” (alteration in original) (quoting Camreta 

v. Greene, 563 U.S. 692, 709 n.7 (2011))). Further, to the 

extent that the Court finds these authorities to be persuasive, 

they do not lead the Court to adopt Relator’s reasoning. OIG 

Advisory Opinion No. 99-2 merely states that discounts that are 

particularly suspect include those that are below supplier costs 

and that such costs should include total costs. 1999 WL 

34984726, at *5, 5 n.12 (Feb. 26, 1999). The district court in 

United States ex rel. McDonough v. Symphony Diagnostics 

Services., Inc. similarly recognized that OIG advisory opinions 

do not receive judicial deference, apply only to those who have 

requested the opinion, and that “OIG's identification of a 

practice as ‘suspect’ merely triggers further investigation by 

OIG; it does not render a practice per se illegal or unlawful . 

. . .” 36 F. Supp. 3d 773, 780 (S.D. Ohio Aug. 12, 2014). 

McDonough further rejected the relator’s argument that “fully 

loaded costs,” including variable and fixed expenses, were 

required under the AKS. Id. at 776, 781. 

The Court thus finds that Hines reasonably utilized an 

accepted method, the same method used by PharMerica in its 

business practices. (Hines Dep. Tr. 148:1-19). To the extent 

that Relator wishes to challenge Hines’s analyses – as he does 

in his supporting and reply briefs – for not being inclusive of 

variable costs or that, despite Hines failing to factor in 

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variable costs, SNFs were nonetheless unprofitable during 

various years, cross-examination is the appropriate means of 

doing so. When opposing experts “have applied a reliable 

methodology in reaching their conclusions, ‘it is up to the jury 

to decide whether the expert used the best or most reliable 

methodology, what weight to accord to his testimony and which of 

[the] competing experts’ opinions should be credited.’” In re 

Johnson & Johnson Talcum Powder Prods. Mktg., Sales Pracs. & 

Prods. Litig., 509 F. Supp. 3d 116, 192 (D.N.J. Apr. 27, 2020) 

(alteration in original) (quoting In re Asbestos Prods. Liab. 

Litig., 714 F. Supp. 2d 535, 547 (E.D. Pa. May 24, 2010)). 

The Court also rejects Relator’s challenge relating to 

Hines’s aggregate figures. Relator contends that, beyond being 

flawed for failure to account for costs beyond drug ingredients, 

presentation of aggregate gross-margin data is misleading 

“trickery” as it allows high margins in some years to smooth out 

negative margins in others. (ECF 640 at 22-24; ECF 671 at 14-

15). The Court takes seriously the allegation that Hines’s 

opinions may mislead the factfinder. See Hartle v. FirstEnergy 

Generation Corp., Nos. 08–1019, 08–1025, 08–1030, 2014 WL 

5474738, at *4 (W.D. Pa. Oct. 29, 2014) (“Proposed expert 

testimony that would mislead the jury or that does not speak 

clearly and directly to an issue in dispute in the case must be 

excluded.” (citing Ford, 481 F.3d at 219 n.6 and Fed. R. Evid. 

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403)). However, it notes that, though Hines presents aggregate 

data throughout his report, annual gross-margin figures are 

provided in Exhibit A, which Relator seeks to exclude. (ECF 

640-3 at p. 15-18). This complete data, combined with Relator’s 

ability to cross-examine Hines, leads the Court to conclude that 

the factfinder would not be misled by aggregate data. See 

United States v. Graves, 465 F. Supp. 2d 450, 457 (E.D. Pa. Dec. 

20, 2006) (concluding after a hearing that expert testimony 

concerning eyewitness reliability would not overwhelm or mislead 

the jury).

Finally, Relator argues that Hines errs in not including 

gross margins for 2005 and 2006, which he, citing his own 

expert, asserts were -48.1% and would have driven down 

PharMerica’s aggregate figures. (ECF 640 at 25-26). Hines 

testified that cost data was not available for 2005 and 2006 as 

PharMerica was then a subsidiary of AmerisourceBergen and he 

chose not to speculate as to what 2005 and 2006 costs might have 

been. (Hines Dep. Tr. at 172:12-21). Relator does not dispute 

this deficiency in the data, but rather counters that his 

expert, Shaked, noted the same deficiencies in the data but 

nonetheless was able to produce estimates for 2005 and 2006. 

(ECF 640 at 26). The Court will not penalize Hines for 

declining to speculate on unavailable data. See Telmanoski v. 

Bonefish Grill, LLC, No. 20-5466, 2022 WL 17324544, at *2 

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(D.N.J. Nov. 29, 2022) (“[E]xpert testimony that ignores 

existing data and is based on speculation is inadmissible.” 

(quoting Yates Real Est., Inc. v. Plainfield Zoning Bd. of 

Adjustment, 404 F. Supp. 3d 889, 926 n.45 (D.N.J. July 31, 

2019))). The relative quality and sufficiency of Hines’s 

opinions are best left to the jury. See In re Johnson & Johnson 

Talcum Powder Prods. Mktg., Sales Pracs. & Prods. Litig., 509 F. 

Supp. 3d at 192; see also Edmond v. Plainfield Bd. of Educ., No. 

11-cv-2805, 2018 WL 4380991, at *4 (D.N.J. Sept. 13, 2018) 

(“Questions as to the sufficiency of an expert’s factual basis 

are generally left to the jury.” (quoting Brill v. Marandola, 

540 F. Supp. 2d 563, 568 (E.D. Pa. Jan. 10, 2008))). 

C. PharMerica’s Motion to Exclude the Opinions of Schafermeyer 

and Hoffman (ECF 641; ECF 642) 

The Court will next evaluate PharMerica’s motions to 

exclude opinions of Relator’s experts Schafermeyer, (ECF 641), 

and Hoffman, (ECF 642), which – among other objections – assert 

that both experts offer impermissible legal opinions, (ECF 641-

1; ECF 642-1). 

District courts have discretion in admitting expert 

testimony that will aid the factfinder, but “must ensure that an 

expert does not testify as to the governing law of the case” and 

– though Federal Rule of Evidence 704 allows experts to embrace 

the ultimate issue – “an expert witness is prohibited from 

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rendering a legal opinion.” Berckeley Inv. Grp., Ltd. v. 

Colkitt, 455 F.3d 195, 217 (3d Cir. 2006) (citing United States 

v. Leo, 941 F.2d 181, 195–96 (3d Cir. 1991)). Permitting an 

expert to provide a legal opinion “usurp[s] the District Court's 

pivotal role in explaining the law to the jury.” Id. (citing 

First Nat’l State Bank v. Reliance Elec. Co., 668 F.2d 725, 731 

(3d Cir. 1981)). 

Experts may, however, comment on industry customs and 

standards so long as they do not opine as to compliance with 

legal duties arising out of those customs and standards. See 

Mastripolito v. Jefferson Health-N.J., 583 F. Supp. 3d 622, 626 

(D.N.J. Feb. 2, 2022) (citing Jordan v. Temple Health Sys., 

Inc., No. 16-5561, 2018 WL 3649019, at *2 (E.D. Pa. Aug. 1, 

2018)). In other words, an expert opinion may indicate in the 

abstract whether certain actions are consistent with legal 

duties but may not instruct the factfinder which result to reach 

by stating whether certain actions did or did not violate a 

legal duty. See Krys, 112 F. Supp. 3d at 193. 

With these basic principles defined, the Court will 

consider the challenged opinions of Schafermeyer and Hoffman. 

1. Schafermeyer 

PharMerica asserts that Schafermeyer was retained to 

respond to its April 2020 motion for judgment on the pleadings 

and a May 2019 legal memorandum and seeks to exclude a 

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background section of Schafermeyer’s report as well as five 

opinions that it claims are impermissible legal opinions. (ECF 

641-1 at 2-3). 

The background section referenced by PharMerica, Section E 

of Schafermeyer’s report, provides background information on the 

AKS, including OIG Advisory Opinion No. 99-2. (ECF 641-2 at ¶¶ 

61-66). Schafermeyer’s opinions state that (1) PharMerica’s 

position that false claims were not presented to an officer or 

employee of the government is disingenuous and inconsistent with 

a variety of authorities, (id. at ¶¶ 67-75), (2) PharMerica’s 

position that Prescription Drug Event (“PDE”) data are not 

claims under the FCA is inaccurate, (id. at ¶¶ 76-84), (3) 

PharMerica is incorrect in asserting that alleged kickbacks 

would not cause harm to the government, (id. at ¶¶ 85-97), (4) 

PharMerica is wrong to claim that low per diem rates charged for 

Part A residents would lead to lower costs, (id. at ¶¶ 98-102), 

and (5) violations of the AKS via an alleged swapping scheme 

would render PharMerica’s prescription claims non-reimbursable, 

(id. at 103-06). 

Relator asserts in his opposition that Schafermeyer’s 

report provides background in the complex environment within 

which PharMerica operated. (ECF 663 at 7-10). The line between 

admissible and inadmissible opinions in such cases is often 

blurred, see Berckeley Inv. Grp., Ltd., 455 F.3d at 218, and 

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here is no exception. The Court finds, as will be discussed 

below, that some – but not all – of the challenged portions of 

the report are inadmissible and will identify specific 

exclusions below. 

The Court begins with Section E of the report, which 

provides background on the AKS. Section E includes brief 

explanations of the AKS and “safe harbor” regulatory exceptions, 

(ECF 641-2 at ¶¶ 61-62), followed by a discussion and quotation 

of OIG Advisory Opinion No. 99-2 including Schafermeyer’s 

opinion that “[o]ne of the examples of commercially unreasonable 

discounts described in the Advisory Opinion mirrors the 

allegations in this case.” (Id. at ¶ 63). Section E continues 

with additional discussion of additional OIG guidance followed 

by assertions that the fourth amended complaint is consistent 

with his understanding of kickback prohibitions and an 

explanation as to why kickbacks are prohibited. (Id. at ¶¶ 64-

66). To the extent that Section E commentates on what the AKS 

prohibits, explains safe harbor, or discusses OIG opinions and 

guidance, the Court agrees with PharMerica that Schafermeyer 

encroaches on the Court’s duty to explain the law to the jury. 

See Wood v. Showers, 822 F. App’x 122, 124 (3d Cir. 2020) (“It 

is the province of a judge – not an expert witness – to instruct 

a jury about governing law.” (citing Berckeley Inv. Grp., Ltd., 

455 F.3d at 217)). 

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Though Relator counters that Section E merely provides 

background information, (ECF 663 at 17), the Court notes that 

Schafermeyer relies on Relator’s complaint to define the AKS and 

safe harbor provisions (which, in turn, cited relevant 

authorities) and attempts to draw parallels between this case 

and an OIG advisory opinion that is not binding on the parties. 

See 42 C.F.R. § 1008.53. To avoid indirectly permitting Relator 

to explain the law to the factfinder and the inclusion of 

potentially inapplicable regulatory standards, the Court will 

exclude these portions of Section E. 

Moving to Schafermeyer’s first opinion, the report 

summarizes PharMerica arguments that false claims were not 

presented to an officer or employee of the government, but 

rather a plan sponsor or pharmacy benefit manager. (ECF 641-2 

at ¶ 67). It goes on to explain that plan sponsors, 

subcontractors, and downstream entities are required to certify 

compliance with applicable laws and regulations and – citing 

PharMerica’s revised responses to Relator’s second set of 

requests for admissions – that PharMerica agreements contained 

provisions relating to legal and regulatory compliance and 

certifications as to the accuracy and completeness of claims 

data and that it made all certifications and acknowledgements as 

required by its agreements. (Id. at ¶¶ 68-72). The opinion 

concludes with Schafermeyer asserting that “PharMerica’s 

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participation in the alleged swapping scheme would, therefore, 

cause false Pa[r]t D claims to be submitted to and paid by the 

government” and that, based on his knowledge, experience, and 

review of the record, the involvement of intermediaries did “not 

negate the fact that PharMerica provided services to Medicare 

and Medicaid patients, caused claims to be presented to the 

Government, and received reimbursement of governmental funds on 

claims that Relator alleges were tainted by illegal kickbacks.” 

(Id. at ¶¶ 73, 75). These opinions, in the Court’s view, walk 

the line between the example provided in Krys, in which 

testimony about whether actions would be inconsistent with legal 

duties were permissible in the abstract, but opinions as to 

whether a duty was indeed violated would be impermissible. 112 

F. Supp. 3d at 193. It will therefore permit the argument 

summary and discussion of agreement language and certifications 

but disallow the application to PharMerica’s actions.2

Second, Schafermeyer summarizes PharMerica’s position that 

PDE data are summary records and not claims for the purposes of 

the FCA, (ECF 641-2 at ¶¶ 76-77), and describes claim and 

2 Further, as noted by PharMerica, (ECF 641-1 at 8), the Court 

has previously “reject[ed] PharMerica’s argument that Relator’s 

pre-FERA claims under Count II and the related ones under Count 

III must be deemed futile for supposed failure to allege 

PharMerica ‘ma[de], use[d], or cause[d] to be made or used, a 

false record or statement to get a false or fraudulent claim 

paid or approved by the Government’ as opposed to by a private 

entity . . . ,” (ECF 544 at 25 (second, third, and fourth 

alterations in original)). 

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reimbursement processes, (id. at ¶¶ 78-79). The opinion then 

recites the Department of Justice’s position contrary to 

PharMerica’s and the government’s statement of interest in 

response to PharMerica’s opposition to the motion for leave to 

file the fourth amended complaint and reviews an earlier opinion 

in this case3 and two out-of-district opinions before concluding 

that PharMerica’s position should be rejected. (Id. at ¶¶ 80-

84). The Court will exclude these portions of Schafermeyer’s 

opinion to the extent that they recite or review caselaw. See 

Mastripolito, 583 F. Supp. 3d at 627; see also Barnes v. Shell 

Expl. and Prod. Co. Appalachia, No. 4:18-CV-01497, 2021 WL 

2106354, at *2 (M.D. Pa. May 25, 2021) (excluding an expert’s 

summary of caselaw). 

Third, Schafermeyer summarizes PharMerica’s argument that, 

in the event that it was overpaid, Centers for Medicare and 

Medicaid Services (“CMS”) was not damaged and rejects that 

position by asserting that the majority of federal payments for 

Part D are impacted by the number and cost of prescription 

claims and, though Part D is paid – in part – prospectively, it 

may be reconciled based on actual expenditures and thus CMS 

would be harmed by paying for fraudulent or otherwise non3 PharMerica, in its brief accompanying its motion, also notes 

that the Court has already held that “PDEs are claims for 

payment on which FCA liability may be based.” (ECF 641-1 at 9 

(citing ECF 544 at 18-19)). 

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reimbursable prescriptions. (ECF 641-2 at ¶¶ 85-93). 

Schafermeyer adds that even when payments are not reconciled to 

an exact amount, a plan’s future bids are based on the actual 

expenditures of prior years and that, if CMS were to detect 

erroneous prescriptions, it would be able to demand adjustments 

for those claims and OIG could exclude the pharmacy from future 

participation in federal healthcare programs. (Id. at ¶¶ 95-

97). The Court disagrees with PharMerica that this portion of 

the expert report drifts into legal opinions and, though 

PharMerica further argues that Schafermeyer speculates as to 

what CMS and OIG might have done, (ECF 641-1 at 10-11), the 

Court further disagrees that identifying potential courses of 

conduct would confuse the jury. 

Fourth, the report, citing a memorandum from PharMerica to 

the United States Attorney’s Office, recites PharMerica’s 

position that lower Part A per diem rates lower drug 

expenditures consistent with public policy and congressional 

intent and that such rates would not impact Part D pricing. 

(ECF 641-2 at ¶¶ 98-99). Schafermeyer – citing the high 

concentration within the LTC pharmacy industry – opines to the 

contrary, that a swapping scheme would likely increase 

healthcare costs or decrease the quality of medical services 

and, while costs may decrease for individual SNFs, low per diem 

rates provided for the purpose of capturing more lucrative Part 

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D and Medicaid patients would result in unfair advantage and 

“crowd out potential competition.” (Id. at ¶¶ 100-101). The 

Court, again, disagrees that Schafermeyer offers legal opinion 

here and, to the extent that PharMerica further contends that 

Schafermeyer “has not done any research on the competitive 

nature of the [LTC pharmacy] industry,” (ECF 641-1 at 12), the 

Court will not exclude the opinion on this basis. Schafermeyer 

testified that he did not personally conduct research on the 

impacts of swapping, but rather based his opinion on literature. 

(Schafermeyer Dep. Tr. at 141:5-11). Given Schafermeyer’s 

expertise in pharmacy administration, (ECF 641-2 at ¶¶ 1-7), the 

Court is satisfied that his knowledge and experience meets the 

liberal standard of exceeding that of the average layman. See 

Krys, 112 F. Supp. 3d at 193-95. 

Finally, Schafermeyer submits that violation of the AKS 

would render claims non-reimbursable and cites PharMerica’s memo 

to the United States Attorney’s office – which itself cited an 

out-of-district case relating to damages. (ECF 641-2 at ¶¶ 103-

105). He concludes by stating: 

[I]t is my understanding that if plan sponsors had 

known that claims were tainted by PharMerica’s 

violation of the AKS, they would not be able to 

reimburse these claims. However, there is no evidence 

that either the plan sponsors or their PBMs were aware 

of the alleged kickback scheme. Instead, they relied 

on PharMerica to submit accurate claims and to comply 

with all Federal and state laws, regulations and 

guidance pertaining to participation in Medicare and 

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Medicaid, including the AKS. 

(Id. ¶ at 106). 

For the same reasons stated above, the Court will exclude 

this opinion as it, albeit indirectly, instructs on caselaw and 

ventures toward applying PharMerica’s actual alleged actions to 

its identified legal duties. See Mastripolito, 583 F. Supp. 3d 

at 627; Rock, 683 F. Supp. 2d at 329. 

To the extent that the Court has not excluded 

Schafermeyer’s opinions above, it will not do so for the 

additional reasons offered by PharMerica, namely that he is not 

qualified to provide his opinions, (ECF 641-1 at 13-15), his 

methodology is unreliable, (id. at 15-17), or that his opinions 

will otherwise confuse or mislead the factfinder, (id. at 17-

19). 

Schafermeyer, among other qualifications, holds master’s 

and doctorate degrees in pharmacy administration, has taught 

master-level courses “dealing with financial management and 

healthcare policy issues such Medicare, Medicaid, managed care 

organizations, and pharmacy benefit managers,” and has authored 

textbook chapters concerning financial and economic issues 

relating to Medicare and Medicaid. (ECF 641-2 at ¶¶ 1, 3, 5). 

“[A]n expert cannot be excluded because the trial court does not 

deem the proposed expert to be the most qualified or because the 

proposed expert does not have the specialization the Court 

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considers to be the most appropriate,” Floorgraphics, Inc. v. 

News Am. Mktg. In-Store Servs., Inc., 546 F. Supp. 2d 155, 167 

(D.N.J. Feb. 5, 2008), but rather – when an expert meets the 

liberal standard for qualification – “the level of the expert’s 

expertise goes to credibility and weight, not admissibility,” 

id. (quoting Kannankeril v. Terminix Int'l Inc., 128 F.3d 802, 

809 (3d Cir. 1997)). 

Further, PharMerica’s concerns as to confusion and 

misleading appear to be focused on Schafermeyer’s citation to 

OIG Advisory Opinion No. 99-2. As the Court has excluded that 

portion of the report above, the Court will consider 

PharMerica’s concerns addressed. 

2. Hoffman 

PharMerica also seeks to exclude opinions of Hoffman, a 

professor at University of Pennsylvania Carey Law School 

retained to rebut Rossiter’s report and opinions, (ECF 642-4 at 

¶¶ 1-3), on the basis that they are improper legal opinions, 

include misleading or unduly prejudicial discussions, and do not 

constitute proper rebuttal, (ECF 642-1). The Court agrees in 

part. 

At the outset, the Court will reject PharMerica’s 

alternative argument that Hoffman’s report constitutes improper 

rebuttal – an argument based in significant part on deposition 

testimony in which Hoffman did not wholly disagree with 

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Rossiter’s opinions and PharMerica’s stance that Hoffman’s 

report does not “respond to the core” of others. (ECF 642-1 at 

17-19). The Court, in exercising its discretion, concludes that 

Hoffman’s report sufficiently explains, repels, counteracts, or 

disproves the opinion of Rossiter. See Crowley v. Chait, 322 F. 

Supp. 2d 530, 551 (D.N.J. Mar. 16, 2004) (citing United States 

v. Chrzanowski, 502 F.2d 573, 576 (3d Cir. 1974)). 

Moving to Opinion A of Hoffman’s report, Hoffman first 

interprets Rossiter’s report to suggest that, because of 

insufficient payment for patient care by Part A, SNFs demand – 

and pharmacies have no choice but to agree to – very low per 

diem pricing for Part A patients. (ECF 642-4 at ¶ 10). Hoffman 

goes on to opine that, though prospective payment creates an 

incentive for SNFs to operate efficiently, “it was not intended 

that the PPS would require parties to violate the law.” (Id. at 

¶ 12). Opinion A states that when Medicare was enacted in 1965 

it did not set reimbursement rates – resulting in reimbursements 

outpacing enrollees, includes a brief history of congressional 

considerations and actions intended to address costs and the 

implementation of prospective payment, and opines that 

prospective payment was not intended to invalidate the AKS or 

force parties into offering services below cost but – to the 

contrary – the AKS has been bolstered over the years to include 

harsher penalties. (Id. at ¶¶ 13-18). 

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PharMerica argues that Opinion A is a veiled attempt to 

present legal arguments, does not directly rebut Rossiter’s 

opinions, and includes improper opinions such as what 

constitutes an AKS violation. (ECF 642-1 at 5-7). The Court 

disagrees. Qualified experts may provide background on a 

statutory or regulatory scheme so long as their opinions do not 

state whether the statute or regulation was violated. See 

Hartle v. FirstEnergy Generation Corp., Nos. 08–1019, 08–1025, 

08–1030, 2014 WL 1117930, at *3, 5-6 (W.D. Pa. Mar. 20, 2014) 

see also United States v. Onyenso, 615 F. App’x 734, 738 (3d 

Cir. 2015) (“Informing the jury about the purpose of a statute 

is permissible, although in some cases that purpose can be 

irrelevant and unduly prejudicial.”). The Court concludes that 

Opinion A provides background information that may prove useful 

to the factfinder and does not usurp the role of the Court or 

the factfinder by setting forth applicable legal standards or 

opining on whether a legal duty was or was not breached. The 

Court will therefore deny PharMerica’s motion as to Opinion A. 

Opinion B requires a different result. In Opinion B, 

Hoffman summarizes her interpretation of Rossiter’s opinion of 

the competitiveness of the LTC market, (ECF 642-4 at ¶ 18), 

before discussing the AKS including its history, what it 

prohibits, penalties for violation, quotations from OIG’s 

website stating that “in the Federal health care programs, 

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paying for referrals is a crime,” and statutory text from the 

2010 amendment of the AKS, (id. at ¶¶ 19-26). The Court finds 

that these opinions encroach on the Court’s role of explaining 

the law and will therefore exclude them. See Wood, 822 F. App’x 

at 124. 

Opinion B next defines swapping and opines that “it 

implicates the AKS,” (ECF 642-4 at ¶ 27), and cites several OIG 

advisory opinions and other sources in support of the 

proposition that OIG has cautioned market participants against 

swapping, (id. at ¶ 28). Hoffman then states that Shaked’s 

report concerning PharMerica’s profitability suggests “that 

PharMerica took losses on Medicare Part A business while it 

received something of greater value in return” and that “[t]hese 

arrangements suggest swapping of below-cost rates to SNFs for 

Medicare Part A business in return for referrals of more 

profitable Medicare Part D and Medicaid business.” (Id. at ¶¶ 

29-30). Hoffman further opines that an example of a successful 

PharMerica bid that fell within the middle range of other 

pharmacies’ bids did not indicate legality as all bids may have 

represented illegal kickbacks and, citing Gale and a 2013 

Omnicare settlement, that “PharMerica’s matching of Omnicare’s 

bid (which PharMerica determined was ‘significantly below cost’) 

could suggest that, indeed, PharMerica was in violation of the 

AKS.” (Id. at ¶ 31). 

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 The Court maintains the same concerns regarding 

discussions of OIG advisory opinions and guidance as detailed 

above, namely the limited applicability of OIG advisory opinions 

and the usurpation of the Court’s role in explaining the law. 

Furthermore, though couched in terms such as “suggest,” the 

Court holds that these opinions invade the province of the 

factfinder in determining whether PharMerica violated the AKS. 

See Berckeley Inv. Grp., Ltd., 455 F.3d at 217; Krys, 112 F. 

Supp. 3d at 193. These opinions will therefore be excluded. 

The remainder of Opinion B raises separate concerns. 

Hoffman cites PharMerica’s February 2010 letter requesting an 

OIG opinion as “acknowledge[ment of] its participation in 

swapping arrangements,” (ECF 642-4 at ¶ 32), cites four 

settlements stemming from alleged swapping schemes including 

that of “Omnicare, PharMerica’s largest competitor,” (id. at ¶ 

33), and references PharMerica’s 2005 settlement and related 

five-year corporate integrity agreement resulting from an 

alleged kickback arrangement, (id. at ¶ 35). 

Relator contends that these references are highly probative 

of PharMerica’s knowledge of, among other things, the AKS and 

how OIG and DOJ handled suspected violations. (ECF 666 at 25-

30). However, expert opinion as to a defendant’s state of mind 

or knowledge is improper. See O'Bryant v. Johnson & Johnson, 

No. 20-2361, 2022 WL 7670296, at *12 (D.N.J. Oct. 13, 2022). 

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Further, even if the Court were to permit such opinions 

from an expert – which it will not – it concludes that whatever 

probative value these references offer is substantially 

outweighed by the risk of unfair prejudice and misleading the 

jury. Evidence of settlements may be excluded under Federal 

Rule of Evidence 403. See Trout v. Milton S. Hershey Med. Ctr., 

572 F. Supp. 2d 591, 600 (M.D. Pa. Aug. 27, 2008) (finding that 

plaintiffs’ settlement with a separate tortfeasor was excludable 

pursuant to Federal Rule of Evidence 403 in a medical 

malpractice action). 

The Court finds that the risk of unfair prejudice is 

particularly high – while the relative probative value is 

comparatively low – with respect to the settlement agreements 

because the alleged swapping schemes did not involve PharMerica 

and PharMerica’s 2005 settlement related to different behavior – 

alleged payment of an “excessive amount of money” to purchase a 

small pharmacy in exchange for referral of Medicaid and Medicare 

business. See OIG Settles Largest Ever Kickback Civil Monetary 

Action Against Pharmerica, U.S. Dep’t of Health and Hum. Servs. 

– Off. of the Inspector Gen. (Mar. 29, 2005), 

https://oig.hhs.gov/newsroom/news-releases-articles/oig-settleslargest-ever-kickback-civil-monetary-action-against-pharmerica/. 

Additionally, the Court finds that the risk of unfair prejudice 

and confusion is sufficiently high as compared to the probative 

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value with respect to Hoffman’s reference to PharMerica’s 

February 2010 letter to OIG. Among the Court’s concerns is the 

fact that, contrary to what Hoffman seems to indicate, (ECF 642-

4 at ¶ 32), PharMerica’s letter does not refer to its thenactive practices, but rather a proposed arrangement, (ECF 637-

4). 

Finally, Opinion C of Hoffman’s report rebuts Rossiter’s 

above-stated opinion as to the separateness of Part A, Part D, 

and Medicaid by stating that “[t]he AKS does not require that an 

illegal kickback affects prices, but rather that referrals might 

not be solely made based on beneficiaries’ best interests” and, 

citing OIG Advisory Opinion No. 99-2, that per diem discounts 

could impact government payment amounts by incentivizing the 

increase of Part D and Medicaid utilization to make up for Part 

A losses. (ECF 642-4 at ¶¶ 39-40). Hoffman discusses CMS 

reliance on Part D plan sponsors’ certifications on behalf of 

themselves, subcontractors, and downstream entities to comply 

with relevant laws and retroactive investigation and enforcement 

when laws are nonetheless violated, indicating the seriousness 

of such violations. (Id. at ¶¶ 43-46). Lastly, Hoffman asserts 

that “PharMerica’s false certifications directly caused CMS to 

pay amounts under Medicare Part D that were nonpayable, and CMS 

can recoup nonpayable amounts retroactively,” and adds that 

pharmacies “define government liability under Part D” and may 

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affect government payment both through their submission of 

claims and the fact that claims in violation of the AKS are 

nonpayable and, if known, would reduce government liability. 

(Id. at ¶¶ 47-52). The existence of private intermediaries 

between the government and pharmacies does not change the fact 

that services rendered in violation of the AKS are not payable, 

according to Hoffman, adding that “[i]f the Plan Sponsor had 

known that PharMerica’s certifications were untrue, the Plan 

Sponsor should not have reimbursed PharMerica’s claims.” (Id. 

at ¶ 54). 

As it has above, the Court will exclude the portions of 

Hoffman’s report that state what is and is not a violation of 

the AKS. See Berckeley Inv. Grp., Ltd., 455 F.3d at 217 

(recognizing that it is courts’ role to explain the law to the 

jury). Further, while experts may base their opinions on a 

version of disputed facts, see Walker, 46 F. App’x at 695-96, 

the Court concludes that Hoffman’s opinions indicating that 

PharMerica in fact made false certifications or otherwise 

violated the AKS impermissibly “stat[e] that [PharMerica] did 

indeed violate an applicable duty through certain actions” and 

therefore must be excluded. See Krys, 112 F. Supp. 3d at 193. 

D. PharMerica’s Motion to Exclude the Opinions of Shaked (ECF 

656) 

Last among the parties’ Daubert motions, PharMerica moves 

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to exclude Shaked’s opinions on, among other bases, poor fit, 

unreliability, and the improper proffering of legal opinions. 

(ECF 656; ECF 656-1). The Court will address these challenges 

in turn below and ultimately grant the motion in part. 

PharMerica first challenges Shaked’s report on the basis of 

fit. Shaked’s report conducts contribution-margin analyses of 

PharMerica by which variable costs – expenses that vary with the 

quantity of products produced – are subtracted from sales. (ECF 

645 at ¶ 39). PharMerica asserts that the question for the 

factfinder in this case is whether PharMerica violated the AKS 

by offering remuneration in exchange for the referral of other 

business and, citing Klaczak ex rel. United States v. 

Consolidated Medical Transport, 458 F. Supp. 2d 622, 678-79 

(N.D. Ill. Sept. 30, 2006), contends that fair market value is 

the relevant benchmark. (ECF 656-1 at 9-10). There has been no 

showing that contribution margin is required or used internally 

to measure performance at the SNF level, according to 

PharMerica, and LTC400 data does not include rebates or 

delivery, labor, and other costs – so PharMerica has, instead, 

relied on gross margin to develop pricing and evaluate 

performance. (Id. at 11-13). 

“Fit” in the context of expert testimony is a question of 

relevance and ability to assist the factfinder with “a liberal 

policy of admissibility.” United States v. Schiff, 602 F.3d 

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152, 173 (3d Cir. 2010) (quoting Kannankeril, 128 F.3d at 806). 

“The standard for fit is ‘not that high’ but ‘is higher than 

bare relevance.’” McGarrigle v. Mercury Marine, 838 F. Supp. 2d 

282, 293 (D.N.J. Dec. 20, 2011) (quoting In re Paoli R.R. Yard 

PCB Litig., 35 F.3d 717, 745 (3d Cir. 1994)). The Court finds 

that Shaked’s analyses “fit” under this liberal standard. 

Though PharMerica seems to seek to narrow the means of 

determining whether remuneration was offered by limiting fair 

market value to an analysis of its competitors’ pricing, the 

Court is persuaded by Gale that PharMerica’s own costs represent 

a relevant factor to that end. See Gale, 2013 WL 3822152, at *6 

(“Omnicare's Usual and Customary price would be evidence of the 

fair market value, but so would the prices charged by Omnicare's 

competitors. Omnicare's costs would also bear on remuneration 

because no rational market participant would intentionally lose 

money on its Part A patients unless otherwise compensated.”). 

The Court therefore holds that Shaked’s analyses will assist the 

factfinder and thus sufficiently fit this case. 

Shaked’s analyses are next challenged based on reliability. 

Shaked’s opinions rely on the unsupported and untested 

assumption that labor and delivery costs are variables 

attributable to individual SNFs by month, according to 

PharMerica, and ignore the differences among SNFs by allocating 

costs and rebates proportionally based on the costs of drugs 

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dispensed. (ECF 656-1 at 15-18). Many of the calculations 

relied on are not actual data, as profit-and-loss statements 

were not available for nearly half of the pharmacy-month 

combinations relevant to the action, so figures were imputed 

from available data – including the use of 2007 average costs 

for completely unavailable 2005 and 2006 data. (Id. at 18-19). 

In addition to these submitted shortcomings, PharMerica argues 

that Shaked’s analyses are further made unreliable by multiple 

errors – including the use of amounts billed as opposed to 

revenue collected and an alternative Part A calculation that 

reduced a Part A billed-to-revenue ratio by the same percentage 

used by Relator’s expert for Part D, contrary to actual 

practice. (Id. at 20-24). The Court will not exclude Shaked’s 

opinions on these grounds. 

The record indicates that at least one of these alleged 

errors – the use of billed amounts as opposed to revenue – was 

the same course used by PharMerica’s expert, Hines. (ECF 657-5 

¶ 88 n.123; Hines Dep. Tr. 143:8 to 144:6). Further, to the 

extent that PharMerica challenges Shaked’s calculations, errors 

themselves do not render expert opinions inadmissible, but 

rather go to the weight of the evidence and the expert’s 

credibility. See In re Johnson & Johnson Talcum Powder Prods. 

Mktg., Sales Pracs. & Prods. Litig., 509 F. Supp. 3d at 144-46 

(discussing an expert’s “careless mistakes and shoddy record 

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keeping”). On review of Shaked’s alleged errors, many of them 

identified through PharMerica’s own expert, the Court concludes 

that “vigorous cross-examination, presentation of contrary 

evidence, and careful instruction on the burden of proof are 

traditional and appropriate means of attacking shaky but 

admissible evidence.” In re Urethane Antitrust Litig., 166 F. 

Supp. 3d 501, 504 (D.N.J. Jan. 25, 2016) (alteration omitted) 

(quoting Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579, 596 

(1993)). 

Important to the Court are Shaked’s use of actual pharmacy 

data and explanation of his methods. PharMerica cites, in part, 

the Third Circuit’s decision in ZF Meritor, LLC, to support its 

challenge of Shaked’s imputation of available data and position 

that his calculations and related opinions must be excluded. 

The challenged expert in ZF Meritor, LLC relied on a one-page 

set of profit and volume projections to calculate damages, for 

which he was unaware of who exactly calculated the projections, 

the methodology used, and other information necessary for his 

effective cross-examination. 696 F.3d at 292-93. Here, 

however, Shaked explains how he used profit-and-loss statements 

of individual pharmacies to calculate monthly variable costs. 

(ECF 645 at ¶ 55 n.60; ECF 645-2 at ¶¶ 71-72). In this respect, 

the Court finds the instant dispute to be more akin to that 

considered within the District of Delaware in Insight Equity v. 

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Transitions Optical, Inc., in which an expert’s projection for 

future damages was based on a model used for business planning. 

See 252 F. Supp. 3d 382, 396 (D. Del. May 9, 2017). The court 

distinguished ZF Meritor, LLC and admitted the expert’s 

testimony because – unlike ZF Meritor, LLC – the information 

relied upon was more comprehensive and the expert was able to 

explain why he believed it to be reliable. Id. 

Though cognizant of its important “gatekeeping function,” 

the Court is reminded that “[t]he standard for reliability is 

‘not that high.’” See Karlo, 849 F.3d at 80-81 (quoting In re 

TMI Litig., 193 F.3d 613, 665 (3d Cir. 1999)). While the Court 

is unpersuaded by Relator’s position that PharMerica’s lack of 

available data itself necessitates acceptance of Shaked’s 

opinions, (ECF 661 at 27), upon review of the alleged 

deficiencies in Shaked’s analyses, the Court concludes that the 

most appropriate course is to permit the factfinder to weigh 

accuracy and credibility following presentation and crossexamination, not wholesale exclusion. 

The Court will also decline to exclude Shaked’s opinions 

relating to California’s Low Price Rule, which prohibits 

charging Medi-Cal more for any service or article than would 

have been charged “to other purchasers of comparable services or 

articles under comparable circumstances.” See Cal. Code Regs., 

tit. 22, § 51501(a); see also Physicians & Surgeons Lab’ys, Inc. 

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v. Dep’t of Health Servs., 8 Cal. Rptr. 2d 565, 571 (Cal. Ct. 

App. 1992). Shaked’s report attempts to evaluate PharMerica’s 

alleged violation of the Low Price Rule by identifying the 

seventy-three SNFs that had both Part A and Medi-Cal patients 

serviced by PharMerica for at least a year and conducting a 

series of analyses to determine whether PharMerica charged 

higher prices for drugs to Medi-Cal patients than Part A 

patients. (ECF 645 ¶¶ 115-126). 

PharMerica challenges this portion of Shaked’s report, 

citing Physicians & Surgeons Lab’ys, Inc., on the basis that 

Shaked “did not try to determine PharMerica’s ‘usual fee to the 

general public’” and that per diem arrangements and payment 

under Medi-Cal are not “comparable circumstances.” (ECF 656-1 

at 29-30). The Court is persuaded by the discussion in United 

States ex rel. Pasqua v. Kan–Di–Ki LLC, which appears to it to 

be the most applicable case on point, in which the relators 

“allege[d] that Defendant gave the SNFs steep discounts on the 

services the SNFs paid for directly and, in exchange, the SNFs 

provided Defendant with all of the SNFs’ laboratory and x-ray 

business for which Defendant could bill the government 

directly.” See No. CV 10–965, 2012 WL 12895229, at *1 (C.D. 

Cal. June 18, 2012). The defendant, at the motion-to-dismiss 

stage, argued that the relators failed to allege violation of 

the Low Price Rule with sufficient particularity pursuant to 

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Federal Rule of Civil Procedure 9(b) because they had not 

alleged the usual sum charged to the public, that Medi-Cal was 

charged a higher rate, or that the services provided to SNFs 

were comparable to services provided under Medicare Part B and 

Medi-Cal. Id. at *7. The court denied dismissal on these 

grounds, holding that the defendant’s “argument ignore[d] the 

allegations in Relators' Complaint that Defendant charged SNFs 

discounted rates for lab tests and x-rays that were not passed 

onto Medi–Cal or Medicare for the same services” and that the 

relators “sufficiently alleged that Defendant used dual pricing 

schedules for ‘perform[ing] comparable services in comparable 

circumstances for both Medi–Cal and its provider-type clients,’ 

and thus state[d] a claim under Regulation 51501.” Id. 

(quoting Physicians & Surgeons Lab’ys, Inc., 8 Cal. Rptr. 2d at 

576). The Court will therefore not exclude this portion of 

Shaked’s report. 

Additional challenges to Shaked’s opinions include his 

review of evidence in the record, such as depositions, on which 

he did not rely on for his opinions; representation that the 

market was permeated by illegal swapping; statements regarding 

PharMerica’s intent; and assertion of legal opinions. (ECF 656-

1 at 24-27). The Court agrees that Shaked’s proposal in his 

reply report that – if faced with the inability to maintain 

profitability with a SNF – PharMerica’s options were to “(1) 

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exit the contract, (2) raise prices, or (3) maintain the status 

quo of selling at below-cost prices (thus continuing the 

swapping),” (ECF 645-2 at ¶ 40 (emphasis added)), should be 

excluded. While Relator counters that Shaked’s opinion was that 

of “an economist regarding the options of a company following 

normal business practices,” (ECF 661 at 36), the statement that 

inaction in such a scenario would constitute illegal swapping 

invades the province of the factfinder. See Krys, 112 F. Supp. 

3d at 193. As it did above, the Court will also prohibit 

references to unrelated settlements, the Lewin Group report, OIG 

advisory opinions and guidance, and PharMerica’s February 2010 

letter to OIG. 

The Court further agrees that Shaked’s summary of email 

exchanges, depositions, and other evidence not relied upon must 

be excluded. Experts are not “permitted to simply summarize the 

facts and the depositions of others. Such testimony comes 

‘dangerously close to usurping the jury’s function’ and 

‘implicates Rule 403 as a “needless presentation of cumulative 

evidence” and “a waste of time.”’” Crowley, 322 F. Supp. 2d at 

553 (quoting United States v. Dukagjini, 326 F.3d 45, 54 (2d 

Cir. 2003)). Relator explains that these recitations merely 

demonstrate a proper factual foundation for Shaked’s opinions, 

(ECF 661 at 37-38), but this point is contradicted by Shaked’s 

own statement that he “did not rely on any of the evidence [he] 

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reviewed” but rather such “evidence is consistent with and 

corroborative of [his] conclusions.” (ECF 645 at ¶ 78). To the 

extent they have not otherwise been excluded, the Court also 

acknowledges that Shaked’s reports include statements concerning 

PharMerica’s knowledge, intent, and compliance with legal 

duties, including that a PharMerica goal described during a 

deposition “would be an example of swapping,” an “email 

demonstrate[d] PharMerica’s willingness to provide drugs to SNFs 

with per diem arrangements for their Medicare Part A patients 

which were below cost or at commercially unreasonable prices,” 

and that an internal PowerPoint document “establishe[d] that 

PharMerica was fully aware of the law on swapping at the time 

that it offered below-cost pricing on homes’ Price A business in 

order to obtain the homes’ more profitable Medicare Part D and 

Medicaid business.” (See, e.g., ECF 645 at ¶¶ 91, 96; ECF 645-2 

at ¶ 147). These portions, too, must be excluded for 

impermissibly offering opinions as to PharMerica’s culpability 

and state of mind. See Krys, 112 F. Supp. 3d at 203.4

IV. Motion to Seal 

Related to the above-reviewed motions to exclude expert 

opinions, the parties jointly move to seal various exhibits 

4 PharMerica’s motion to exclude Shaked’s opinions expressly 

“replace[d] the initial filing on June 24, 2022 (ECF 644, 645, 

646).” (ECF 656 at 2). The Court will therefore order that the 

original motion to exclude Shaked’s opinions, (ECF 644), be 

denied as moot. 

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attached to their Daubert motions. (ECF 675). Motions to seal 

within this District are governed by Local Civil Rule 5.3. See 

Medley v. Atl. Exposition Servs., Inc., 550 F. Supp. 3d 170, 203 

(D.N.J. July 26, 2021). Local Civil Rule 5.3 requires that 

motions to seal be made via a single, consolidated motion on 

behalf of all parties, L. Civ. R. 5.3(c)(1), and provide (a) the 

nature of the materials or proceeding at issue, (b) the private 

or public interests warranting the relief sought, (c) the 

clearly defined, serious injury that would result without 

relief, (d) an explanation as to why less restrictive 

alternatives are unavailable, (e) any prior orders sealing the 

same materials, and (f) the identity of any objector, L. Civ. R. 

5.3(c)(3). 

Moving parties may overcome the presumption in favor of 

public access only by a showing of “good cause” – that is “a 

particularized showing that disclosure will cause a ‘clearly 

defined and serious injury’” – that materials should be 

protected. See Medley, 550 F. Supp. 3d at 203-04 (quoting Pansy 

v. Borough of Stroudsburg, 23 F.3d 772, 786 (3d Cir. 1994)). 

The parties’ motion is accompanied by the certification of 

PharMerica’s counsel, which identifies exhibits – filed pursuant 

to Magistrate Judge Joel Schneider’s discovery confidentiality 

order, (ECF 154) – for which the parties either withdraw their 

sealing request or jointly move to seal, (ECF 675-1 at ¶¶ 3-4). 

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Counsel states that these exhibits contain trade secrets and 

other private information the disclosure of which would result 

in substantial financial and business-relationship harms. (Id. 

at ¶¶ 5, 7-8). The exhibits “do not contain non-confidential 

information that can be redacted in a way that would be 

meaningful to the public” and thus no less-restrictive 

alternative exists, according to counsel. (Id. at ¶ 9). 

The Court has reviewed the exhibits sought to be sealed, 

the majority of which consist of financial data and analyses, 

private communications, and apparent portions of internal 

presentations. Similar information has been sealed within the 

District, see Sanofi-Aventis U.S. LLC v. Merck Sharp & Dohme 

Corp., No. 2:17-cv-05914, 2018 WL 10152220, at *2 (D.N.J. Nov. 

13, 2018) (granting a motion to seal private communications with 

the Food and Drug Administration); Boehringer Ingelheim Pharma 

GMBH & Co. KG v. Mylan Pharms., Inc., No. 14–4727, 2015 WL 

1816473, at *2 (D.N.J. Apr. 22, 2015) (sealing portions of a 

brief and declaration containing sales and revenue information), 

and the Court agrees with the parties that disclosure of such 

information would cause significant harm to PharMerica and no 

less-restrictive alternatives would be practical. The parties’ 

motion to seal is granted as to these exhibits. 

The parties’ motion will be denied, however, to the extent 

that they seek to seal expert reports, or excerpts thereof, in 

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full. Counsel’s certification submits that these reports 

contain confidential business information. (ECF 675-1 at ¶ 4). 

However, unlike the accompanying exhibits that the Court 

concludes are appropriate for sealing – which are relatively 

short and contain little if any non-sensitive information, the 

expert reports sought to be sealed are – in some instances – 

hundreds of pages long and it is not apparent to the Court that 

they consist entirely of confidential business information or 

that no less-restrictive alternative to complete sealing exists. 

Further, some of the relevant content of the experts’ opinions 

has necessarily been discussed within this Opinion. See Janssen 

Prods., L.P. v. Lupin Ltd., No. 2:10–05954, 2014 WL 956086, at 

*3 (D.N.J. Mar. 12, 2014). 

The Court will therefore deny the parties’ motion to seal 

to the extent it seeks to seal expert reports in full, see 

Richardson v. City of Newark, No. 16-cv-265, 2019 WL 1795542, at 

*2 (D.N.J. Apr. 24, 2019) (conditionally denying a motion to 

seal portions of an expert report for failure to demonstrate 

that no less restrictive alternatives were available), and 

provide thirty days for the parties to file a new motion to seal 

those portions of the record, and only those portions of the 

record, for which an adequate justification can be proffered. 

V. Conclusion 

For the reasons stated above, Relator’s motions to exclude, 

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(ECF 636; ECF 639), will be denied; PharMerica’s motions to 

exclude, (ECF 641; ECF 642; ECF 656), will be granted in part; 

PharMerica’s initial motion to exclude the opinions of Shaked, 

(ECF 644), will be denied as moot; and the parties’ joint motion 

to seal, (ECF 675), will be granted in part and the parties will 

be provided thirty days to file a new motion to seal the expert 

reports in full or in part. 

An Order consistent with this Opinion will be entered. 

Date: _March 31, 2023_ _s/ Noel L. Hillman 

At Camden, New Jersey NOEL L. HILLMAN, U.S.D.J. 

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