A qui tam suit alleging fraud against one of the biggest private contractors for the multibillion-dollar Medicare Part D prescription-drug program survived a motion to dismiss last week.

U.S. District Judge Ronald Buckwalter of the Eastern District of Pennsylvania allowed every claim, including three made under the False Claims Act, to proceed in a 98-page decision he issued only a few months after the case was briefed.

“Primarily, the court finds that plaintiff has pled a plausible claim for relief under three key sections of the False Claims Act,” Buckwalter said in Spay v. CVS Caremark.

Chief among them, Buckwalter held that the request for reimbursement for drugs dispensed to Medicare Part D beneficiaries from the government, called a Prescription Drug Event or PDE for short, qualifies as claims subject to enforcement by the FCA.

Buckwalter’s opinion in this case marks the first decision that goes to the heart of the Part D program, which has been in effect for six years, said Pamela Brecht, a lawyer from Pietragallo Gordon Alfano Bosick & Raspanti who is on the team representing the relator, Anthony Spay.

In 2007, a Puerto Rican health insurance company called Medical Card System, or MCS, hired Spay, a former pharmacist, and his company, Pharm/DUR, to audit the Part D claims processed by its subcontractor, Caremark. In early 2007, Caremark merged with CVS to become CVS Caremark, which is the largest prescription provider in the country, according to the opinion.

Based on his findings from that audit, Spay filed a whistleblower suit against CVS Caremark, alleging that it has engaged in a years-long scheme to defraud the government by filing false claims under Part D, which resulted in the payment of administrative and dispensing fees as well as pharmacy charges for the company. The suit was unsealed earlier this year.

CVS Caremark had argued that the PDE records were only data used by the company and the government for accounting purposes, meaning that they aren’t subject to enforcement under the FCA, which “imposes liability on any person who ‘knowingly makes, uses, or causes to be made or used, a false record or statement to get a false or fraudulent claim paid or approved by the government,’” according to the opinion.

Buckwalter was not convinced by CVS Caremark’s argument that PDEs don’t constitute a request for payment from the government; rather, he said that the company was only playing with semantics.

The PDEs that CVS Caremark submitted to the Centers for Medicare and Medicaid Services, or CMS, are clearly requests to collect money from the government for the prescriptions dispensed to Part D patients, Buckwalter said.

“The PDE data is the only record submitted from PBMs or Part D sponsors that triggers CMS’s payment obligation to the Part D sponsor,” Buckwalter said.

A Pharmacy Benefit Manager, or PBM, dispenses prescription drugs to people who are covered by the Part D plan on behalf of the Part D sponsors that contract with the government to administer the Part D plan. In this case, CVS Caremark is the PBM for MCS, the company that Spay audited.

Part of CVS Caremark’s argument that the PDEs don’t count as claims is that in some literature, CMS refers to them as “claims data” rather than “claims.” Buckwalter was not persuaded.

“The PDE data is the only record submitted from PBMs or Part D sponsors that triggers CMS’s payment obligation to the Part D sponsor,” Buckwalter said. “The mere fact that CMS refers to PDE submissions as ‘data’ and not ‘claims’ does not change what these PDE submissions are in the Medicare Part D scheme — claims on which CMS makes payment. Any effort by defendants to argue to the contrary constitutes mere linguistic maneuvering.”

That ruling is hugely significant, Brecht said. “The PDE is the record” that shows someone got prescription drugs with government funds and the PBM is the gatekeeper, she said. “This case affirms that,” Brecht said.

In a different argument addressing the same section of the FCA, CVS Caremark claimed that it couldn’t be held liable since it was paid a fixed rate by MCS for the prescriptions it dispensed, regardless of the cost listed on the PDE, and because it was paid by MCS, not directly by the government, according to the opinion.

“The court finds that defendants submitted the PDE data directly to CMS, on behalf of MCS, ‘to get’ such claims paid by CMS,” Buckwalter said. “It is irrelevant that MCS, not defendants, received the initial payment from CMS. The amended complaint adequately pleads that defendants knew and intended that the PDE data would cause CMS to reimburse MCS for those claims and that MCS would, in turn, reimburse Caremark.”

Buckwalter also agreed with Spay that he could bring nationwide FCA claims based on the narrow findings of his audit of MCS in Puerto Rico, against the objections of CVS Caremark. The company argued that he hadn’t pled the nationwide claims with sufficient particularity and that they are merely speculative.

“The court finds strong inference that defendants submitted false claims nationwide,” Buckwalter said. “Indeed, the sheer number of claims identified by plaintiff in at least three states and Puerto Rico suggests, without need for speculation, that defendants’ reporting practices likely occurred at defendants’ other facilities throughout the country.”

While the government has declined to intervene in the suit up to this point, it submitted a statement of interest in September noting that its decision to not intervene yet should not be read as a comment on the merits of the case.

“The United States remains the real party in interest in this matter, even though it has not intervened in this action. In addition, because the False Claims Act … is the United States’ primary tool used to prosecute fraud on the government, it has a keen interest in the development of the law in this area and in the correct application of that law in this and similar cases,” the government said in its statement.

Of the short turnaround time for the court’s opinion, Brecht said, “I was astounded.” The speed with which the court handled the case is a testament to the importance of the Part D program, she said. “It’s a weighty issue,” Brecht said.

With the country’s looming economic crisis, called the fiscal cliff, and talk of cutting government programs in order to save money, Brecht said, the country needs to properly police the programs it already has, like Part D.

Thomas Gallagher of Pepper Hamilton in Philadelphia, who represented CVS Caremark, couldn’t immediately be reached for comment.

Saranac Hale Spencer can be contacted at 215-557-2449 or sspencer@alm.com. Follow her on Twitter @SSpencerTLI.

(Copies of the 98-page opinion in Spay v. CVS Caremark, PICS No. 12-2408, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •