Opinion ID: 3219321
Heading Depth: 2
Heading Rank: 3

Heading: The Original Source Exception.

Text: The relators claim that their action nevertheless survives under the original source exception to the public disclosure bar. See 31 U.S.C. § 3730(e)(4)(A)-(B). Congress altered the definition of original source as part of the PPACA - 21 - amendments in 2010.6 For the first time, the statute provides alternative original source definitions based on the timing of the public disclosure. First, a relator who prior to a public disclosure . . . has voluntarily disclosed to the Government the information on which allegations or transactions in a claim are based is considered an original source. Id. § 3730(e)(4)(B)(i). The relators do not contend that they meet this definition. Instead, they seek refuge in a narrower second category of original sources: individuals who, despite not having provided their information to the government prior to a public disclosure, nonetheless possess knowledge that is independent of and materially adds to the publicly disclosed allegations or transactions and have voluntarily provided the information to the Government before filing an action under this section. Id. § 3730(e)(4)(B)(2). It follows that relators who do not come forward until after a public disclosure has occurred face additional hurdles to original source status. In this instance, the relators' attempt to assume the mantle of original source status cannot clear the 6 The parties have agreed, both before the district court and on appeal, that the current version of the original source exception applies to this case, and they have pitched their arguments accordingly. We therefore do not address the preamendment version of the provision. - 22 - materially adds hurdle (and, thus, we do not address the independent knowledge hurdle). The meaning of the materially adds language in the original source exception is a matter of first impression for this court. At its most abecedarian level, an addition is material if it is [o]f such a nature that knowledge of the item would affect a person's decision-making, or if it is significant, or if it is essential. Black's Law Dictionary, 1124 (10th ed. 2014); see ABLE, 816 F.3d at 431. This dictionary definition comports with the common law understanding of material, which focuses the relevant inquiry on whether a piece of information is sufficiently important to influence the behavior of the recipient. See Universal Health Servs., Inc. v. United States ex rel. Escobar, ___ S. Ct. ___, ___ (2016) [No. 15-7, slip op. at 14-15]. As such, our task is to ascertain whether the relators' allegedly new information is sufficiently significant or essential so as to fall into the narrow category of information that materially adds to what has already been revealed through public disclosures. As the level of detail in public disclosures increases, the universe of potentially material additions shrinks. The question of whether a relator's information materially adds to public disclosures often overlaps with the questions of whether public disclosure has occurred and, if so, whether the relator's allegations are substantially the same as - 23 - those prior revelations. See Cause of Action v. Chi. Transit Auth., 815 F.3d 267, 283 (7th Cir. 2016); Osheroff, 776 F.3d at 815-16. Despite this potential for overlap, though, the materially adds inquiry must remain conceptually distinct; otherwise, the original source exception would be rendered nugatory. See Moore, 812 F.3d at 306; cf. United States ex rel. Duxbury v. Ortho Biotech Prods., L.P., 579 F.3d 13, 25 (1st Cir. 2009) (explaining, under pre-amendment version of the original source exception, that a relator may sometimes provide different information of the publicly disclosed fraud . . . of great significance, especially when the public disclosures themselves rely on uncertain or unavailable information). In the case at hand, the relators muster a host of arguments in support of their claim to original source status. These arguments draw on both their complaint and the declarations submitted as part of their opposition to CVS's motion to dismiss. We slice these arguments into four quadrants and engage them separately. The first slice need not detain us. The relators recycle their arguments about the presence of the fraud in other states and under Medicare Part D as a basis for claiming that they have materially added to the public disclosures. We rejected those self-same arguments in determining that the complaint alleges a scheme substantially the same as that revealed by the public - 24 - disclosures, and the relators' arguments are no more persuasive in the original source context. The public disclosures revealed that CVS operated its HSP program in multiple states and was fiercely resistant to the idea that HSP prices had to be provided to government healthcare programs. The relators cannot plausibly claim to have materially added to that knowledge. The relators' second argument focuses on the temporal scope of the alleged fraud. They say that they have supplied original information indicating that CVS's fraud continued after the company's 2010 dispute with Connecticut.7 This claim is meritless: the public disclosures left no doubt about CVS's insistence that its HSP prices should not be considered when calculating U&C prices. Given this publicly disclosed fact, there was every reason to think that CVS's scheme would remain velivolent elsewhere past the date of the Connecticut cut-off. Under these circumstances, simply asserting a longer duration for the same allegedly fraudulent practice does not materially add to the information already publicly disclosed. See Cause of Action, 815 F.3d at 281-82. 7 One relator, Winkelman, suggests that he qualifies as an original source because he has provided information about CVS's failure to offer U&C prices to the government prior to the inception of the HSP program. Even if true, this is beside the point: the scheme articulated in the complaints focuses entirely on CVS's actions with respect to HSP prices. - 25 - Third, the relators trumpet their personal knowledge of specific instances of alleged overbilling. For example, Winkelman says that, while conducting claim audits, he observed that CVS's reported U&C prices were higher than its discount plan HSP prices. Similarly, Martinsen says that she has provided specific examples of overpaid claims at the retail level and that she personally contacted Medicaid and Medicare Part D payors to confirm that they were paying more than the HSP prices for drugs included in their programs. But the public disclosures made it crystal clear that CVS was not providing its HSP prices to Medicaid and, by extension, to Medicare Part D. Offering specific examples of that conduct does not provide any significant new information where the underlying conduct already has been publicly disclosed. The relators' last argument involves Martinsen's importuning that she has provided critical evidence of CVS's intent to defraud the government — evidence gleaned from her experience as a pharmacist at a CVS store in Minnesota. This evidence, she says, demonstrates that the HSP program was really a cover for an open-ended offer of discounts to the general public. To substantiate this claim, she asserts that CVS never tried to enforce the program requirements; that CVS did not train employees in the workings of the program; that it had no system for filing HSP enrollment forms; that its computer programming was tailored - 26 - to facilitate the scheme; and that HSP customers made up the largest share of CVS's prescription drug purchasers. We do not rule out the possibility that furnishing information that a particular defendant is acting knowingly (as opposed to negligently) sometimes may suffice as a material addition to information already publicly disclosed. See 31 U.S.C. § 3729(b)(1). Here, however, the public disclosures made it pellucid that CVS was acting deliberately, and that its course of conduct was studied (not merely careless). Accordingly, the allegations gleaned from Martinsen's experience add nothing significant about CVS's knowledge: every indication from the public disclosures was that CVS was fully aware that it was refusing to provide its HSP prices to the Connecticut Medicaid program prior to the legislative change — and, indeed, adopted this firm position in spite of known doubts about whether this conduct was legal. Martinsen's additional information merely confirms this state of affairs. At most, her allegations add detail about the precise manner in which CVS operated the HSP program, and a relator who merely adds detail or color to previously disclosed elements of an alleged scheme is not materially adding to the public disclosures. See ABLE, 816 F.3d at 432. That ends this aspect of the matter. Because the relators offer no new information that materially adds to what - 27 - previously appeared in public disclosures, they do not qualify as original sources.