Court Opinion

ID: 3013838
Source: CourtListenerOpinion
Date Created: 2015-10-13 21:59:02.859034+00
Date Added: 2024-06-11T11:46:49.089318
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Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

9-1-2004

USA v. Omnicare Inc
Precedential or Non-Precedential: Precedential

Docket No. 03-2187

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Recommended Citation
"USA v. Omnicare Inc" (2004). 2004 Decisions. Paper 292.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/292

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                PRECEDENTIAL          OF OMNICARE, INC.);
   UNITED STATES COURT OF           WINSLOW'S PHARMACY,
          APPEALS               (A WHOLLY-OWNED SUBSIDIARY
    FOR THE THIRD CIRCUIT             OF OMNICARE, INC.);
                                    BACH'S PHARMACY EAST

           03-2187
                                            Thomas G. Quinn,

 UNITED STATES OF AMERICA, ex                       Appellant
             rel.;                         _______________
  THOMAS G. QUINN, BRINGING
   THIS CAUSE OF ACTION ON          Appeal from the United States
          BEHALF OF                          District Court
THE UNITED STATES OF AMERICA         for the District of New Jersey
                                        (D.C. No. 98-cv-02031)
                                District Judge: Honorable Dickinson R.
              v.                               Debevoise

         OM NICARE INC.;             Argued on December 16, 2003
    POMPTON NURSING HOME
         SUPPLIERS, INC.,       Before: ROTH, MCKEE and ROSENN,
(A WHOLLY-OWNED SUBSIDIARY                 Circuit Judges
      OF OMNICARE, INC.);
 ALAN TRASTER, INDIVIDUALLY
     AND IN HIS CAPACITIES        (Opinion filed : September 1, 2004)
  AS AN OFFICER OF OMNICARE,
       INC. AND POMPTON         Harvey S. Mars, Esquire (Argued)
 NURSING HOME SUPPLIERS AND     Leibowitz & Mars
       VARIOUS JOHN DOE         322 West 48 th Street
    COMPANIES WHO PROCESS       New York, NY 10036
 MEDICATIONS RETURNED FROM
 PATIENTS AT LONG-TERM CARE           Counsel for Appellant
     FACILITIES LOCATED IN
    THE STATE OF NEW JERSEY     Harry R. Silver, Esquire (Argued)
      PURSUANT TO THEIR         Patton Boggs
         CONTRACTUAL            2550 M. Street, N.W.
  RELATIONS WITH NEW JERSEY     Washington, D.C. 20037
   MEDICAID/PAAD PROGRAMS;
 CHERRY HILL PHARMACY, LTC,     James A. Robertson, Esquire
(A WHOLLY-OWNED SUBSIDIARY      Kalison, McBride, Jackson & Murphy
645 Martinsville Road                             bases his allegations on the fact that
P.O. Box 814                                      Medicaid pays for medications that the
Liberty Corner, NJ 07938                          defendant phar mac ies dispense to
                                                  Medicaid beneficiaries but, if a medication
Peter S. Pearlman, Esquire                        is subsequently returned to a defendant
Jessica V. Henry, Esquire                         pharmacy for resale, the pharmacy credits
Cohn, Lifland, Pearlman, Herrmann &               Medicaid with only 50% of what Medicaid
Knopf                                             had paid the pharmacy for the medication.
Park 80 Plaza West - One                          We find that the lack of legal authority,
Saddle Brook, NJ 07663                            requiring Medicaid-provider pharmacies to
                                                  credit Medicaid when a medication is
E. John Steren, Esquire                           returned for resale, is disturbing. We
Ober, Kaler, Grimes and Shriver                   conclude, however, that there can be no
1401 H. Street, N.W.                              FCA liability in the absence of such
Suite 500                                         authority. In addition, Quinn’s failure to
Washington, D.C. 20005                            present evidence of the actual submission
                                                  of a single false claim to Medicaid is fatal
        Counsel for Appellees                     to this qui tam action.

                                                      I. FACTUAL BACKGROUND

       O P I N I O N OF THE COURT                         Pompton is a Medicaid-provider
                                                  pharmacy that provides medications to
                                                  individuals residing in long-term care
ROTH, Circuit Judge:                              facilities. Long-term care facilities, which
       Omnicare, Inc., a Medicaid-                include nursing homes, provide care to
provider pharmacy, and various of its             patients who participate in medical
subsidiaries, including Pompton Nursing           insurance programs, including Medicaid.
Home Suppliers (Pompton), were charged
by Thomas Quinn with submitting false
                                                  Pharmacy are also subsidiaries of
claims in violation of the False Claims Act
                                                  Omnicare. The District Court, in
(FCA), 31 U.S.C. § 3729 et seq.1 Quinn
                                                  analyzing Quinn’s claims, focused solely
                                                  on Pompton’s recycling and crediting
                                                  practices because Quinn worked at
   1
     The complaint also named Alan                Pompton and did not advance a theory of
Traster; Bach’s Pharmacy, East; Cherry            FCA liability against any other Omnicare
Hill Pharmacy and Winslow’s Pharmacy              subsidiary that was not advanced against
as defendants. Pompton and Bach’s                 Pompton. For the same reason, we too
Pharmacy, East are the same entities.             will focus solely on Pompton’s recycling
Cherry Hill Pharmacy and W inslow’s               and crediting practices.

                                              2
Approximately sixty percent of the                      of the net amount payable
medications that Pompton dispenses are                  under this claim has been
paid for by New Jersey Medicaid.2 The                   paid; and that payment of
remainder are paid for by the patients                  such a m ou n t w ill be
themselves or by private insurers. After a              accepted as payment in full
Medicaid-provider pharmacy has supplied                 without additional charge to
a medication to a Medicaid patient, the                 the patient or to others on
pharmacy submits a claim to Medicaid.                   his behalf . . .. I understand
Medicaid then pays the pharmacy for the                 that . . . any false claims,
medication.      Instructions for filing                statements or documents, or
Medicaid claims are set forth in New                    concealment of a material
Jersey Medicaid’s Pharmacy Services                     fact, may be prosecuted
Fiscal Agent Billing Supplement (FABS).                 under applicable federal or
FABS instructs provider pharmacies to                   State law, or both.
submit Medicaid pharmacy claims on the                  On     some        o c c a sions, th e
MC-6 form. The MC-6 claim form                   medications, for which Pompton has
contains a “Provider Certification” which        submitted a claim and received full
the provider must sign:                          reimbursement from Medicaid, are
       I certify that the services               returned.4      New Jersey pharmacy
       covered by this claim were                regulations allow Medicaid provider
       personally rendered by me                 pharmacies to recycle returned unit dose
       o r u n d e r m y d i r e ct              packaged medications if they have been
       supervision . . . and that the            stored properly and the seal and control
       services covered by this                  number remain intact. See N.J.A.C. §
       claim and the amount                      13:39-9.15.5 When Pompton receives
       charged thereof are in                    returned medications for recycling, it is
       accordance with the                       Pompton’s practice to send Medicaid a
       regulations of the New
       Jersey Health Services
       Program3 ; and that no part               A NN. § 30:4D-3.
                                                    4
                                                      A change in the patient’s
   2
      Medicaid services are financed by          medication, the death of a patient, or the
the state governments and the federal            transfer of a patient out of a long-term
government. In New Jersey, the Division          care facility are common reasons why
of Medical Assistance and Health                 medications are returned.
Services (DMAHS) administers the
                                                    5
program.                                              Recycling involves restocking and
                                                 redispensing the returned medications.
   3
     The New Jersey Health Services              Unit dose packaging means single tablets
Program is Medicaid. See N.J. S TAT.             contained in sealed blister packs.

                                             3
check for 50% of the cost of the returned              concerns in a memo to Traster. Quinn was
medications.6 Pompton justifies retaining              dismissed by Pompton a few days later on
the other 50% to cover the expense of                  August 22, 1997.
r e sto c k i n g an d r e d i sp e n sing th e
medications.                                                  II. PROCEDURAL HISTORY
          The qui tam plaintiff, Thomas
Q u i n n , was P o m p t o n ’ s r e g io n a l                Quinn filed a complaint under seal
comptroller. Quinn alleges that it was                 against Pompton in the United States
Pompton’s practice, when medications                   District Court for the District of New
were returned, to push out the individual              Jersey. Quinn brought the action under the
tablets and capsules from their sealed                 qui tam provisions of the False Claims
packages and place them in separate                    Act, 31 U.S.C. § 3729 et seq.,7 under New
containers for subsequent use. Quinn                   Je r se y’ s Co nscien tiou s E m pl oye e
claims that he observed workers in the                 Protection Act (CEPA), N.J.S.A. § 34:19-
return department removing pills from                  3, and under New Jersey common law.
their original sealed containers by pushing            Quinn claimed that Pompton violated §§
them through their packaging and that he               3729(a)(1), (2), and (7) of the FCA
saw the workers create new packages for                because it (1) failed “to submit
the pills by re-sealing the packages with              adjustments in order to partially void
irons.         Quinn asserts that Pompton              claims (submitted on required MC-6 claim
eventually redispensed the returned                    forms) where the medications supplied
medications.                                           pursuant to those claims were ultimately
          After Quinn learned that another             returned,” (2) sold “Medicaid the same
recently acquired Omnicare subsidiary in               medication twice,” (3) sub mitted
Illinois had settled FCA claims because it             “Medicaid claims for pharmaceuticals that
had represented to Medicaid that
medications were destroyed when they in
fact had been returned and redispensed, he                7
                                                             The FCA allows a private citizen,
became concerned about Pompton’s
                                                       called a relator, to bring an action in the
Medicaid recycling and crediting practices.
                                                       name of the United States, and the
He expressed his concern to Alan Traster,
                                                       government may intervene if it so
the president of Pompton, who told Quinn
                                                       chooses. See 31 U.S.C. §§ 3730(b)(1),
that Pompton was not required to credit
                                                       (2). In this case, the government did not
New Jersey Medicaid for returned
                                                       intervene. The FCA permits the relator
medications. Quinn memorialized his
                                                       to bring the action in the absence of the
                                                       government’s intervention. Quinn is
                                                       entitled to collect at least 25 percent but
   6
    Pompton “inadvertently” credited                   not more than 30 percent of the proceeds
New Jersey Medicaid only 25% between                   of the action or settlement. See id. §§
November 1996 and September 1997.                      3730(b)(4)(B), (d)(2).

                                                   4
were removed from unit dose packaging in          2003). A district court may grant summary
the recycling process, in violation of New        judgment when there is no genuine issue
Jersey Board of Pharmacy Regulations”,            of material fact and the moving party is
and (4) returned “credits to Medicaid for         entitled to judgment as a matter of law.
less than 100% of the amount initially            Fed. R. Civ. P. 56(c). The moving party
claimed for returned medications.” United         bears the burden to show an absence of
States ex rel. Quinn v. Omnicare, Inc., No.       any genuine issues of material fact.
98-2031 (DRD), slip op. at 9-10 (D.N.J.           “[I]nferences to be drawn from the
filed March 28, 2003). Quinn claimed that         underlying facts contained in the evidential
his dismissal violated the anti-retaliation       sources . . . must be viewed in the light
provisions of the FCA and CEPA. Quinn             most favorable” to the non-moving party.
also brought a claim for unjust enrichment.       Hollinger v. Wagner Mining Equipment
       On cross-motions for summary               Co., 667 F.2d 402, 405 (3d Cir. 1981).
judgment, the District Court granted              “[I]f a disputed fact exists which might
summary judgment to Pompton on Quinn’s            affect the outcome of the suit under the
FCA claims and his unjust enrichment              controlling substantive law,” summary
claim. The court declined to exercise             judgment is not appropriate. Belitskus,
supplemental jurisdiction over Quinn’s            343 F.3d at 639 (citation omitted). Any
CEPA claim and dismissed it for lack of           doubt a court has about the existence of a
subject matter jurisdiction.                      genuine issue of material fact should be
       Quinn appeals the adverse                  resolved in the non-moving party’s favor.
disposition of his FCA claims.8                   Continental Ins. Co. v. Bodie, 682 F.2d
                                                  436, 438 (3d Cir. 1982).          Summary
       III. JURISDICTION AND                      judgment is appropriate when there is no
       STANDARD OF REVIEW                         genuine issue of material fact to be
                                                  resolved at trial. Gruenke v. Seip, 225
       The District Court had jurisdiction        F.3d 290, 298 (3d Cir. 2000).
pursuant to 28 U.S.C. § 1331 and 31
U.S.C. § 3732(a). We have appellate                        IV. DISCUSSION
jurisdiction pursuant to 28 U.S.C. § 1291.        A. The Submission of the Initial
       We exercise plenary review over            Medicaid Claim
the District Court’s decision granting
summary judgment and will use the same                  The FCA imposes liability on any
test applied below.          Belitskus v.         person who
Pizzingrilli, 343 F.3d 632, 639 (3d Cir.
                                                         (1) knowingly presents, or
                                                         causes to be presented, to an
   8                                                     officer or employee of the
     Quinn does not appeal the District
                                                         United States Government .
Court’s entry of summary judgment on
                                                         . . a false or fraudulent claim
his FCA retaliation claim.

                                              5
       for payment or approval;                        payment by a private insurance company
                                                       after Medicaid has paid for the medication,
       (2) knowingly makes, uses,                      a billing error, or a computer error in
       or causes to be made or                         processing the claim. A claim is “paid in
       used, a false record or                         error” when it is paid and it should not
       statement to get a false or                     have been paid. See N.J.A.C. § 10:49-
       fraudulent claim paid or                        8.3(b). In addition, N.J.A.C. §10:51-
       approved          by   the                      1.25(j)(2) requires “[p]harmacies . . . to
       Government . . ..                               initiate claim reversal for those services in
                                                       which a claim was generated and
31 U.S.C. §§ 3729(a)(1), (2). A person                 adjudicated to payment . . . and the service
acts “knowingly” when he “(1) has actual               was not subsequently provided to a . . .
knowledge of the information; (2) acts in              beneficiary.”
deliberate ignorance of the truth or falsity                   FABS instructs the pharmacy to fill
of the information; or (3) acts in reckless            out an “Adjustment Request” form when a
disregard of the truth or falsity of the               claim is underpaid, overpaid, or paid in
information, and no proof of specific                  error. In the case of a claim that is paid in
intent to defraud is required.” 31 U.S.C. §            error, the pharmacy voids the entire claim
3729(b).                                               and Medicaid deducts the voided amount
        Each time Pompton submits a claim              from the next payment. The provider
for payment on the MC-6 form, it certifies             indicates on the “Adjustment Request”
that “the services covered by this claim               form the reason for the adjustment or void.
were . . . rendered . . . and . . . the services       One of the reasons listed is “service not
covered by this claim and the amount                   provided.” None of these regulations,
charged thereof are in accordance with . .             however, instruct pharmacies on how to
. [Medicaid] regulations . . ..” Quinn                 credit or adjust a claim for medications
alleges that Pompton’s initial claims are              after those medications have been returned
false due to its failure to adjust them when           for recycling.
medications are returned for recycling.                        Nevertheless, Quinn contends that
        There are several regulatory                   Pompton violates §§ 3729(a)(1) and (2) of
provisions which do require the voiding or             the FCA by failing to void or adjust claims
adjustment of claims under certain                     for medications after these medications
circumstances. Section 10:49-8.3 of the                have been returned for redispensing.
New Jersey Administrative Code requires                Quinn argues that the initial claims
“[a]djustments following payment of                    become false when medications have been
claims” when “a claim is incorrectly paid              returned because the claims then become
and the provider receives an overpayment               claims for services that were not provided
or underpayment” or when a claim is “paid              to the intended beneficiaries. Quinn
in error.” Situations that may cause                   asserts that, after the return of the
underpayment or overpayment include a                  medications, unless Pompton reverses the

                                                   6
claims as required by N.J.A.C. § 10:51-                  under the FCA.9 The only question is
1.25, the certification on the initial MC-6              whether a claim, which is not “false” or
form is a false one.                                     “fraudulent” when initially submitted, can
          The District Court rejected Quinn’s            later be rendered so if the medication is
argument because there is no language in                 returned.
the MC-6 form, its instructions, or                             There is FCA liability when a
Medicaid regulations that states that                    “provider knowingly asks the Government
medications cannot be returned. Quinn,                   to pay amounts it does not owe.” United
slip op. at 11. The court noted that, even               States ex rel. Clausen v. Lab. Corp. of
though N.J.A.C. § 10:51-1.25(j)(2)                       America, 290 F.3d 1301, 1311 (11 th Cir.
requires reversal when “services are not                 2002). The FCA reaches “all fraudulent
provided,” the regulation does not further               attempts to cause the Government to pay
state that “services are not provided” when              out sums of money.”            Harrison v.
m e d i c a t i o n s a r e d i sp e n s e d a n d       Westinghouse Savannah River, 176 F.3d
subsequently returned. Id. at 11-12.                     776, 788 (4 th Cir. 1999). The terms “false”
          We agree that there is no regulatory           and “fraudulent” are not defined in the
requirement of the reversal of a claim once              FCA. The terms, however, do have
a medication has been returned. As the                   independent meanings:
District Court held, if there is no                             A common definition of
requirement to adjust the claim, there is no                    “fraud” is an intentional
liability for a failure to do so.
          However,           even           more
fundamentally, Quinn’s allegation is that                   9
                                                             “Claim” is defined as:
the initial claim is rendered false by the
                                                               [A]ny request or demand,
return. The fallacy of this argument lies in
                                                               whether under contract or
the fact that the return of a medication,
                                                               otherwise, for money or
which at the outset has been dispensed to
                                                               property which is made to a
the Medicaid beneficiary, does not render
                                                               contractor, grantee, or
the initial claim false or fraudulent. In
                                                               other recipient if the
order to prove FCA liability under §§
                                                               United States Government
3729(a)(1) and (2), Quinn must prove that
                                                               provides any portion of the
“(1) the defendant presented or caused to
                                                               money or property which is
be presented to an agent of the United
                                                               requested or demanded, or
States a claim for payment; (2) the claim
                                                               if the Government will
was false or fraudulent; and (3) the
                                                               reimburse such contractor,
defendant knew the claim was false or
                                                               grantee, or other recipient
fraudulent.” Hutchins v. Wilentz, Goldman
                                                               for any portion of the
& Spitzer, 253 F.3 176, 182 (3d Cir. 2001).
                                                               money or property which is
There is no question that the MC-6 forms
                                                               requested or demanded.
Pompton submits to Medicaid are claims
                                                         31 U.S.C. § 3729(c).

                                                     7
       misrepresentation,                          order to impose FCA liability, it is not
       concealment,              or                necessary that the claim have been false
       n o ndisclosure f or th e                   when it was originally submitted. We
       purpose of inducing another                 reject this argument. The FCA aims to
       in reliance upon it to part                 impose liability for a broad range of
       with some valuable thing                    conduct, including “each and every claim
       belonging to him or to                      submitted . . . which was originally
       surrender a legal right.”                   obtained by means of false statements or
       “False” can mean “not true,”                other corrupt or fraudulent conduct.”
       “deceitful,” or “tending to                 S.Rep.No. 99-345 at 9 (1986), reprinted in
       mislead.” The juxtaposition                 1986 U.S.C.C.A.N. 5266, 5274 (emphasis
       of the word “false” with the                added).      Pompton’s claims were not
       word “fraudulent,” plus the                 originally false – they did not misrepresent
       meanings of the words                       the dispensing of the medication or the
       comprising the phrase “false                cost of what was dispensed.
       claim,” suggest an improper                          We conclude that we would be
       claim is aimed at extracting                exceeding the intent of Congress in
       money the government                        defining false claims if we were to permit
       otherwise would not have                    the transforming of a valid claim into a
       paid.                                       false claim by the occurrence of a
                                                   subsequent fortuitous event which is not
Mikes v. Straus, 274 F.3d 687, 695 (2 nd           itself the basis of any required adjustment.
Cir. 2001) (citations omitted).                             For the above reasons, we hold that
       Under these standards, it is clear          Pompton is not liable under the FCA for
that, when Pompton submits the initial             the submission of the initial Medicaid
claim form, it is not intentionally making         claims or for the failure to adjust an initial
any misrepresentation. To the contrary, it         claim when a medication is returned.
is merely asking for reimbursement for
medication which it has dispensed and for          B.The Successive Claim for a Recycled
which it is entitled to payment. When              Medication
Pompton submits the initial claim for
payment, it has no way of knowing if a                    In Quinn’s second allegation, he
medication will be returned. Pompton has           contends that, when a returned medication
not then “knowingly” presented a “false or         is resold, Pompton is making a claim for
fraudulent claim” at the time of the               an amount that has, at least in part, already
original claim submission. Nor can the             been paid. The MC-6 form requires
changed circumstances, caused by the later         Pompton to certify that “no part of the net
return of the medication, render the initial       amount payable under this claim has been
claim false or fraudulent.                         paid.” Quinn asserts that Pompton submits
       Quinn contends, however, that, in           a false claim to Medicaid when Pompton

                                               8
sells a medication to a Medicaid patient for       The District Court held that, without
the second time. Quinn alleges that by             evidence of the actual submission of a
only partially crediting Medicaid for a            false claim, there was no genuine issue of
returned medication and then submitting a          material fact.
new claim for the full cost of the same                     Quinn argues that there is a material
medication, Pompton violates §§                    question of fact whether Pompton
3739(a)(1) and (2) of the FCA because              submitted duplicate Medicaid claims for
Pompton has claimed more than the actual           the same medication, given that Pompton
cost of the medication and has falsely             recycles returned medications and
represented on the second claim form that          approximately 60% of Pompton’s sales are
there has been no previous payment for the         to Medicaid. Pompton responds that, at
medication.                                        the summary judgment stage, Quinn has
        The District Court rejected this           the “burden to establish, in at least one
argument. The court refused to find FCA            instance, that a given pharmaceutical had
liability under Quinn’s theory that                been paid for by Medicaid, returned to the
Pompton must have resold returned                  pharmacy, and then redispensed and
medications to Medicaid by virtue of the           rebilled to Medicaid.” We agree and
large volume of Medicaid business it               conclude that Quinn has not met this
conducts. Quinn, slip op. at 12. The               burden.
court, relying on Clausen, 290 F.2d 1311,                   In Clausen, the court held that a
to support the theory that the actual              False Claims Act plaintiff cannot “merely
submission of a false claim must be                . . . describe a private scheme in detail but
proved, noted that Quinn did not point to a        then . . . allege simply and without any
single instance when the same medication           stated reason for his belief that claims
was in fact the subject of two claims.10           requesting illegal payments must have
                                                   submitted, were likely submitted or should
                                                   have been submitted to the Government.”
   10                                              290 F.3d at 1311. Clausen alleged that
     Quinn asserts that the District Court
                                                   the defendant medical testing company
erred by relying on Clausen. Whereas
                                                   was overbilling the government by
the dismissal in Clausen was pursuant to
                                                   performing unauthorized, unnecessary, and
Federal Rule of Civil Procedure 9(b) for
                                                   excessive testing. The court affirmed the
failure to plead fraud with particularity,
                                                   dismissal of Clausen’s claim because he
Quinn points out that the District Court
                                                   never provided a single false claim was
held that his complaint satisfied Rule
                                                   actually submitted. Id. at 1312.
9(b)’s requirements. The present case
differs from Clausen, however, because
Clausen was dismissed on the pleadings
for failure to satisfy the pleading                step, he then succumbed at the summary
requirements of Fed. R. Civ. P. Rule               judgment stage for failure to establish a
9(b). While Quinn survived this first              necessary element of FCA liability.

                                               9
       Similarly, in United States ex rel.          for summary judgment, and Quinn did not
Alfatooni v. Kitsap Physicians Service, the         ask the District Court for extended
Ninth Circuit Court of Appeals held that            discovery pursuant to Federal Rule of Civil
the plaintiff’s failure to present an actual        Procedure 56(f). Quinn failed to link
false claim submitted to the government             Pompton’s recycling and crediting
was fatal to the action. 314 F.3d 995 (9th          practices to the actual submission of a
Cir. 2002). Alfatooni, relying on the               false claim. Without proof of an actual
volume of bills submitted to the                    claim, there is no issue of material fact to
Government each year, made the same                 be decided by a jury. Quinn’s theory that
argument Quinn makes here – that false              the claims “must have been” submitted
claims must have been submitted. The                cannot survive a motion for summary
court held that an FCA plaintiff must come          judgment.
to court with a “claim in hand” and                         Furthermore, we agree with the
“generalized, speculative suppositions”             District Court that, even assuming that
will not suffice. Id. at 1002-03. The court         Pompton is submitting successive claims
contrasted United States v. Krizek, 192             for the same medications, there can be no
F.3d 1024 (D.C.Cir. 1999), in which the             FCA liability because New Jersey
court “presumed that the defendants would           regulations entitle Pompton to recycle and
be liable under the False Claims Act for            redispense returned medications. Section
submitting psychiatric bills that totaled           13:39-9.15(a)(2) of the New Jersey
more than twenty four hours for a given             Administrative Code, entitled “Disposal of
day.” Alfatooni, 314 F.3d at 1003 (citing           unused medications,” allows unused unit
Krizek, 192 F.3d at 1026-27). The court in          dose packaged medication, that “has been
Alfatooni noted that in Krizek, “[t]he              stored in a medication room or secure area
government had the Medicare/Medicaid                in the institution . . . [with the] seal and
claims in hand,” id. (citing Krizek, 192            control number . . . intact” to be “recycled
F.3d at 1027-28), even though it could not          and redispensed.” The regulation does
prove exactly which of the “claims in               not, however, require pharmacies to credit
hand” actually was fraudulent.                      M edica id for th e “recycled and
       The same reasoning applies here.             redispensed” medications.           Because
Pompton admits that approximately 60                Pompton can legally recycle returned
percent of its business is Medicaid and that        medications, the initial sale and the
it accepts returned medications for                 subsequent sale of a returned medication
recycling. However, as Alfatooni failed to          are properly viewed as separate
do, Quinn also did not come forward with            transactions. As the District Court held,
a single claim that Pompton actually                these transactions are “not duplicative in
submitted to Medicaid which covered a               any sense that would make them
medication for which Pompton had                    inconsistent with the fu ll-payment
previously submitted a claim. Discovery             representation on the MC-6.” Quinn, slip
was complete at the time Pompton moved              op. at 13. Under this separate transaction

                                               10
theory, Pompton does not make a false                of compliance with a contract term,
representation on the second claim form              statute, or regulation – when payment is
even though it does not state that Medicaid          conditioned on compliance with that
has already paid, at least in part, for a            requirement. See, e.g., United States ex
redispensed medication.                              rel. Siewick v. Jamieson Sci & Eng’g, Inc.,
        In so concluding, we recognize that          214 F.3d 1372, 1376 (D.C. Cir. 2000). 11
the second claim would be submitted to               We have not yet adopted this theory of
Medicaid for payment for the same                    FCA liability. However, other Courts of
medication. When Pompton submits the                 Appeals have. The Second Circuit noted
second claim, it knows that the medication,          in Mikes that it was joining the “Fourth,
which is the subject of that claim, was              Fifth, Ninth, and District of Columbia
already dispensed once and returned.                 Circuits in ruling that a claim under the
Pompton also knows that Medicaid has                 Act is legally false only where a party
already paid 50% of the cost of the                  certifies compliance with a statute or
medication.      However, because New                regulation as a condition to governmental
Jersey regulations allow Pompton to                  payment.” 274 F.3d at 697 (citations
recycle returned medications and because             omitted).
no regulation requires Pompton and other                     In Mikes, the court limited the
Medicaid pharmacies to credit Medicaid               applicability of the implied false
for the returns, we conclude that we cannot          certification theory to cases where “the
impose FCA liability based on the                    underlying statute or regulation upon
submission of the second claim.                      which the plaintiff relies expressly states
                                                     the provider must comply in order to be
C.The Recyc ling         of   Repackaged             paid.” 274 F.3d at 699. The court limited
Medications                                          FCA liability, premised on a legally false
                                                     certification, to those situations where a
        The MC-6 form requires Pompton               party certifies compliance with an
to certify that the “services covered by this        underlying statute or regulation as a
claim and the amount charged thereof are             condition of payment because the FCA
in accordance with . . . [Medicaid]                  aims to impose liability only where a
regulations . . ..” Quinn argues that                certification of compliance influences the
Pompton violated §§ 3729(a)(1) and (2) of
the New Jersey Administrative Code when
it submitted claims to Medicaid because                 11
                                                           Legally false certification is
the certification on the claim constituted
                                                     different than factually false certification,
an implied false certification that the
                                                     “which involves an incorrect description
returned medication was recycled in
                                                     of goods or services provided or a
accordance with “regulations.”
                                                     request for reimbursement for goods or
        The “certification theory” of FCA
                                                     services never provided.” Mikes, 274
liability is based on a false representation
                                                     F.3d at 697.

                                                11
government’s decision to pay. Id. at 697                  70 (Bankr. D. Del. 2002)13 ; United States
(noting that the FCA “does not encompass                  ex rel. Cooper v. Gentiva Health Servs,
t h o s e i n s t a n c e s o f r e g u l a t o ry        Inc., No. 01-508, slip op. at 2-3, 2003 WL
noncompliance that are irrelevant to the                  22495607, (W.D.Pa. Nov. 4, 2003); United
government’s disbursement decisions”). 12                 States ex rel. Watson v. Connecticut Gen’l
Under this approach, when an underlying                   Life Ins. Co., No. 98-6698, 2003 WL
regulation expressly prohibits payment                    303142, at * 10 (E.D.Pa. Feb. 11, 2003).
upon non-compliance with its terms, the                              In support of imposing liability
submission of a claim implicitly certifies                under this theory, Quinn relies on § 13:39-
compliance with that regulation.                          9 . 1 5 ( a )( 2 ) o f t h e N e w J e r s e y
         District courts in the Third Circuit,            Administrative Code, Board of Pharmacy
including the court in this case, have cited              Regulations, which provides: “If a unit
Mikes in support of the concept of false                  dose packaged medication has been stored
certification liability. See In re Genesis                in a medication room or secure area in the
Health Ventures, Inc., 272 B.R. 558, 569-                 institution and the medication seal and
                                                          control number are intact, the medication
                                                          may be recycled and redispensed.”
   12                                                     Medicaid regulations require pharmacies
      The Second Circuit declined to
                                                          to comply with Board of Pharmacy
follow the broader approach taken in Ab-
                                                          Regulations in order to participate in the
Tech Construction, Inc. v. United States,
                                                          Medicaid program. See N.J.A.C. § 10:51-
31 Fed. Cl. 429 (Fed. Cl. 1994), aff’d
                                                          1.2(d) (expressly incorporating the
without opinion, 57 F.3d 1084 (Fed. Cir.
                                                          requirements of N.J.A.C. § 13:39).
1995), where “the Court of Federal
                                                                     The District Court held that failure
Claims held that the defendants’
                                                          to comply with the Board of Pharmacy
submission of payment vouchers,
                                                          regulations may disqualify a provider from
although containing no express
                                                          particip ation in the program, but
representation, implicitly certified their
                                                          compliance with the regulations is not a
continued adherence to the eligibility
                                                          condition to payment by Medicaid. Quinn,
requirements of a federal small business
                                                          slip op. at 14-15.          Quinn contends,
statutory program.” Mikes, 274 F.3d at
                                                          however, that a finding of FCA liability,
699 (citing Ab-Tech, 31 Fed. Cl. at 434).
                                                          based on implied false certification theory,
The Mikes court reasoned that “[t]he Ab-
                                                          should not be limited to situations where
Tech rationale . . . does not fit
comfortably into the health care context
because the False Claims Act was not
                                                             13
designed for use as a blunt instrument to                       The decision of the Bankruptcy
enforce compliance with all medical                       Court in Genesis Health Ventures was
regulations – but rather only those                       affirmed by the District Court,          .
regulations that are a precondition to                    This case is currently on appeal to this
payment . . ..” 274 F.3d at 699.                          Court.

                                                     12
the underlying regulation or statute                comply with Medicaid regulations. The
expressly states that compliance is a               Medicaid regulations expressly incorporate
condition of payment. Quinn argues that             compliance with the Board of Pharmacy
there should be FCA liability when non-             Regulations, including N.J.A.C. § 13:39-
c o m p l i a n ce wit h the u nder lying           9.15, as a condition to participation in the
regulations would disqualify the provider           program. If a provider does not comply
from participation and that there should be         with the Medicaid regulations, by reason
FCA liability here because the improper             of not complying with the incorporated
recycling of medications would disqualify           Board of Pharmacy regulations, not only
Pompton from participation in the                   will the provider be ineligible to
Medicaid program.14                                 participate in the Medicaid program, but
          Here, the MC-6 form requires              Medicaid may seek to recover the money
providers to certify that the pharmaceutical        it paid to the provider for services covered
services                                            by the claims. See N.J.A.C. § 10:49-
                                                    9.8(c).
                                                              Quinn’s arguments are compelling.
   14                                               Even though § 13:39-9.15 does not
       The United States filed a brief as
                                                    expr essly c o ndition payme nt o n
amicus curiae in the appeal of the
                                                    compliance with its terms, it hardly can be
Bankruptcy Court’s decision in Genesis
                                                    said that non-compliance with its terms is
Health Ventures, 272 B.R. 558. The
                                                    “ ir r ele va nt to the g over nm ent’ s
government refers to the 1986 Senate
                                                    disbursement decisions.” Mikes, 274 F.3d
Report, which states that “claims may be
                                                    at 697. However, even if Pompton does
false even though the services are
                                                    not qualify for Medicaid reimbursement if
provided as claimed if, for example, the
                                                    it dispenses an improperly recycled
claimant is ineligible to participate in the
                                                    medication to a Medicaid patient, we
program.” S.Rep.No. 99-345 at 9,
                                                    cannot say that, in this case, Pompton has
reprinted in 1986 U.S.C.C.A.N. 5266,
                                                    made any false certifications in connection
5274 (emphasis added). The report also
                                                    with a Medicaid claim. The reason we
states that a false claim “may take many
                                                    come to this conclusion is because of the
forms, the most common being a claim
                                                    impossibility of proving from the numbers
for goods or services not provided, or
                                                    alone that a claim was made by Pompton
provided in violation of contract terms,
                                                    to Medicaid for an improperly recycled
specifications, statute or regulation.” Id.
                                                    medication.
The government argues that Congress
                                                              If 100% of the medications that
intended eligibility for program
                                                    Pompton dispensed were paid for by
participation and compliance with
                                                    Medicaid, then a fortiori, any claim for an
contract terms, specifications, statutes or
                                                    improperly recycled medication would be
regulations to be conditions which must
                                                    paid for by Medicaid. If that claim was
be met in order for claims to be true
                                                    made on Form MC-6, it would be
under the FCA.

                                               13
inevitable that Pompton had violated                the District Court with a single instance
N.J.A.C. § 3729(a)(1) and (2), and                  where Pompton submitted a claim for
Medicaid would be paying Pompton on the             payment for medications recycled in
basis of a false certification. Such a              violation of § 13:39-9.15. 16 For that
situation would be similar to the one in            reason, Quinn’s false certification claim
Krizek, 192 F.3d 1024, where we know                fails.
that a false claim had to have been made            D. The Failure to Give Medicaid 100%
when 25 or more hours were being                    Credit for Returned Medications
charged to M edicaid for a 24 hour day.
        In the present case, however, Quinn
cannot demonstrate either that an                      16
                                                           We do find, however, that there
improperly recycled medication was paid
                                                    would be enough evidence in the record
for by Medicaid or that it was paid for by
                                                    to create a genuine issue of material fact
one of the other sources of payment for the
                                                    as to whether Pompton was recycling
medications that Pompton dispensed.
                                                    unit dose packaged medications in
Although we might hypothesize that 60 %
                                                    violation of N.J.A.C. § 13:39-9.15.
of the improperly recycled medications
                                                    Quinn witnessed Pompton’s employees
were paid for by Medicaid, it is impossible
                                                    recycling medications by removing pills
to rule out the chance that they were paid
                                                    from their sealed packaging, placing the
for by non-Medicaid sources.15 For this
                                                    pills in large containers, and then
reason, we agree with the District Court
                                                    resealing the pills in new packages using
that “even assuming that the MC-6
                                                    an iron. The attorney for Pompton
certified compliance with Board of
                                                    admitted to the District Court at the
Pharmacy regulations as a condition of
                                                    summary judgment hearing that returned
payment, Plaintiff has not pointed to sales
                                                    medications were repackaged. See
inconsistent with the certification.” Quinn,
                                                    Transcript of Proceedings dated
slip op. at 14. As with our discussion on
                                                    November 25, 2002 at A7. This alone,
successive claims, Quinn did not provide
                                                    however, is insufficient to withstand
                                                    Pompton’s motion for summary
                                                    judgment. Quinn submits that every sale
   15
       We could even hypothesize that if            has a proportion of recycled inventory
improperly recycled medications                     because recycled medications are
comprised more that 40% of the                      returned to inventory. Since at least 60%
medications that Pompton dispensed, it              of Pompton’s sales are to Medicaid
would be inevitable that a falsely                  patients, Quinn argues that at least 60%
certified claim had been made to                    of the improperly recycled medications
Medicaid, the source of 60% of                      must have been paid for by Medicaid.
Pompton’s receipts. There are, however,             As we discuss supra, however, this
insufficient facts in the record to support         “must have been” theory of liability
even this more generous hypothesis.                 cannot serve as a basis for FCA liability.

                                               14
         The reverse false claim provision of               pharm acist and           a    facility
the FCA imposes liability on any person                     representative.
who “knowingly makes, uses, or causes to
be made or used, a false record or                           Pompton maintains that § 8:39-
statement to conceal, avoid, or decrease an          29.4(j) does not impose an obligation to
obligation to pay or transmit money or               credit Medicaid because Pompton is not a
property to the Government.” 31 U.S.C. §             “facility.” Quinn responds that § 8:39-
3729(a)(7). To make a prima facie case of            29.4(j) does require Pompton to credit
liability under § 3729(a)(7), the plaintiff          Medicaid for returned medications because
must prove that the defendant did not pay            the definition of “facility” includes
back to the government money or property             pharmacies. Quinn argues that this section
that it was obligated to return. The District        requires Pompton to credit Medicaid 100%
Court held that Pompton was not liable               because “credit” means “full credit,” and
under the reverse false claim provision              “[i]f something less than full credit was
because it found that Pompton is under no            acceptable to the State, then the regulation
legal obligation to credit Medicaid for              would have said so.”
returned medications. A prerequisite for                     As the District Court noted, “[i]t is
liability under this theory is a legal               debatable whether . . . [N.J.A.C. § 8:39-
obligation to credit Medicaid 100% for               29-4(j)] even governs the conduct of
returned medications. The District Court             Medicaid pharmacies.” Section 8:39-29-
noted that there is no federal or New                4(j) is a regulation promulgated by the
Jersey Medicaid statute or regulation                Department of Health and Senior Services,
which specifically requires that Pompton             not Medicaid. The regulation appears
do so. Id., at 15-16.                                under Chapter 39, which is titled
         Quinn asserts that Pompton’s                “Standards for Licensure of Long-Term
failure to give 100 % credit to Medicaid             Care Facilities.” This alone suggests that
violated § 3729(a)(7) of the FCA. Quinn              nursing homes, as opposed to pharmacies,
argues that § 8:39-29.4(j) of the New                are required to create a “crediting
Jersey Administrative Code imposes a                 mechanism.”
legal obligation on Pompton to credit                        The term “facility” is defined as “a
Medicaid for returned pharmaceuticals.               facility or distinct part of a facility licensed
That section provides:                               by the New Jersey State Department of
         Where allowable by law, the                 Health and Senior Services as a long-term
         facility shall generate a crediting         care facility.”       N.J.A.C. § 8:39-1.2.
         m e c h a n ism for medications             Pompton is not a “facility” within this
         dispensed in a unit-of-use drug             definition because it is not licensed as a
         distribution system, or other system        long-term care facility. Furthermore, it
         that allows for the re-use of               does not make sense for Pompton, a
         medications. The crediting system           pharmacy, to be considered a “facility”
         shall be monitored by the provider          within the regulation’s definition when, if

                                                15
it were considered a “facility,” it would, in                consumers and the State Medicaid
addition, have to maintain a pharmacy.                       program will benefit from this
See id. § 8:39-29.1 (facilities “shall have a                proposed rule.
consultant pharmacist and either a provider
pharmacist, or if the facility has an in-             26 N.J.R. 1776 (Monday, May 2, 1994).
h o u s e p h a r m a c y, a d ir e ctor of           The other passage states:
pharmaceutical services”).                                  The economic impact of this
         Although Pompton is not a                          amendment should result in savings
“facility,” the second sentence of the                      to residents and families and third
regulation requires Pompton, because it is                  party payors such as Medicaid.
a provider pharmacist, to monitor the                       These savings will occur as a result
facility’s crediting system. See id. § 8:39-                of drugs which will be returned to
29.4(j). Therefore, Pompton, acting as a                    the pharmacy for credit. Drugs
long-term care facility’s mandatory                         which have been . . . returned to the
pharmacy provider, does have an                             pharmacy will be credited to that
obligation under this regulation to                         resident . . . The overall savings to
“observe, watch, or check” the crediting                    residents, families and Medicaid
mechanism put in place by the long-term                     may exceed $200,000.
care facility. See id. § 8:39-1.2. This
obligation to monitor, however, does not              29 N.J.R. 4415(a) (Monday, October 20,
expressly include an obligation to credit             1997). These two passages do lend
Medicaid for returned medications.                    support for Quinn’s argument that state
         Quinn cites two passages in the              officials expected N.J.A.C. § 8:38-29.4(j)
New Jersey Register in support of his                 to result in savings for Medicaid as a result
argument that Pompton has an obligation               of crediting. It nevertheless is not clear
to credit Medicaid for returned                       who has an obligation to credit and how
medications. The first passage states:                much credit is required to be given.
         T h e D epartment anticip ate s                      Even if the regulation imposed
         significant cost savings will accrue         upon Pompton an obligation to credit
         as a result of N.J.A.C. § 8:39-              Medicaid, as the District Court noted, “it
         29.4(j) . . . The rule discontinues          does not impose upon them a requirement
         the current requirement to destroy           that they credit Medicaid any specific
         all unused medications . . . [T]he           amount for returned medications.” Quinn,
         product is returnable and can be             slip op. at 16. Quinn argues that credit
         dispensed again by the retail                means 100%. We conclude, however, that,
         pharmacy. Although no statewide              in light of the absence of a clear obligation
         dollar impact is available, literally        to credit Medicaid and the absence of any
         thousands of dollars of medications          Medicaid or other regulation requiring
         are destroyed by many facilities             provider pharmacies to credit at a specific
         monthly.         Both private pay            rate, we can not impose FCA liability on

                                                 16
Pompton.17                                                  NJ KidCare programs capitate the
         Quinn also argues that Pompton, by                 dispensing fee for each prescription
deducting 50% to cover the costs of                         for beneficiaries in Medicaid-
recycling, violates N.J.A.C. § 10:49-14.5.                  approved nursing facilities . . .
This Medicaid regulation provides: “A                       Additional dispensing fees (add-
provider shall not pay nor require payment                  ons) per prescription shall be given
of an administrative charge or service fee                  to pharmacy providers who provide
. . . for services for which reimbursement                  the following levels of services:
is included as part of the Medicaid . . .
fee.” The District Court rejected Quinn’s                   1. Twenty-Four Hour Unit Dose
argument, noting that it “assumes that such                 Service: Pharmacies . . . dispensing
a restocking fee pays for a service ‘for                    medication in a dispensing system
which reimbursement is included’ in other                   in which a 24-hour supply of unit
Medicaid payments . . ..” Id.                               dose oral medication . . . is
         Quinn argues that the capitation                   delivered for each beneficiary
payment Medicaid pays to Pompton for                        daily, shall be reimbursed the cost
medications dispensed to Medicaid                           of all reimbursable medication plus
beneficiaries is understood to include the                  a fee of $0.656 per beneficiary day.
costs associated with returns. N.J.A.C . §
10:51-2.7, titled “Prescription dispensing                   Edward Vaccaro, Assistant Director
fee (capitation)” provides, in relevant part:        of the Office of Health Service
         (a) The New Jersey Medicaid and             Administration within DMAHS, explained
                                                     in his depositions that “[t]he capitation . .
                                                     . attempts to compensate the pharmacy for
   17                                                different costs associated with delivery
       Edward Vaccaro, a New Jersey
                                                     systems, which is why the 24-hour unit
Medicaid representative, stated during
                                                     dose is the higher capitation . . ..” He also
his deposition that the regulations at
                                                     stated that “[c]apitation is intended to
issue in this case require pharmacies to
                                                     reimburse providers of long-term care
provide credit for returned medications at
                                                     pharmacy services for the costs associated
100%. Quinn asks us to accord this
                                                     with the dispensing of drugs . . . [and] [i]n
statement deference as an agency
                                                     the case of long-term care, I would
interpretation. However, the statement,
                                                     consider recycling to be part of
offered in a litigation setting, was not the
                                                     dispensing.” Because only unit dose drugs
product of a rulemaking or an official
                                                     may be recycled, it may be fairly
agency interpretation. Thus, regardless
                                                     understood by Vaccaro that the capitation
of any deference that may be due a state
                                                     fee covers the costs of redispensing the
agency’s interpretation of its own
                                                     returned drugs. However, as Vaccaro
regulations, we are not persuaded that the
                                                     admitted, there is no regulation that
statement represents an official agency
                                                     explicitly bars the collection of a
position on this matter.

                                                17
restocking and redispensing f e e.                    liability. 18
Furthermore, § 10:51-2.7 does not indicate
that the cost of restocking and                                       V. CONCLUSION
redispensing returned medications is
included in the capitation payment.                          For the foregoing reasons, we will
Therefore, Pompton is not charging “an                affirm the District Court’s grant of
administrative charge or service fee . . . for        summary judgment against Thomas Quinn.
services for which reimbursement is                   In doing so, we are constrained by the lack
included as part of the Medicaid . . . fee.”          of a regulation requiring that credit be
N.J.A.C. § 10:49-14.5.                                given for recycled medications. We
        Finally, Quinn argues that Pompton            believe that Congress and/or the New
acknowledges an obligation to fully credit            Jersey legislature might serve Medicaid
Medicaid by submitting reimbursement                  well if this lack of regulation were
checks to Medicaid. Nevertheless, in                  corrected.
order for there to be liability under §
3729(a)(7) of the F CA , a
misrepresentation must be made to
“conceal, avoid, or decrease an obligation
to pay or transmit money or property to the
Government.” 31 U.S.C. § 3729(a)(7).
Even if Pompton’s payments are implicit
representations that they are giving full
credit, without a clear obligation to credit
Medicaid, these representations are not
made to avoid or decrease a legal
obligation. As the District Court noted,
“[e]ven if the relevant regulations could be
construed to contain such an obligation,
the lack of clear legal authority might
preclude any finding that Defendants
breached the obligation with the requisite
level of knowledge.” Quinn, slip op. at 19,
n.16.
        We conclude, therefore, that the
failure to credit 100% of the cost of the
medication is not a basis for FCA                         18
                                                            Quinn also appears to make a
                                                      worthless services claim in his reply
                                                      brief. He did not pursue, and the District
                                                      Court did not rule on, this claim below.
                                                      Therefore, we will not address it.

                                                 18