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September 20, 2013

MSC grants leave in qui tam action against major pharmacies over generic drug prices

Walgreen and other big-box pharmacies got a chance to turn the tide in a lawsuit seeking to recover allegedly excessive generic drug charges when the Michigan Supreme Court granted leave in State of Michigan ex rel Gurganus v. CVS Caremark Corp.   A rather obscure provision in the Michigan Public Health Code (MCL 333.17755(2)) requires a pharmacist to “pass on the savings in cost” when dispensing a generic drug in lieu of a brand name drug.  Plaintiffs brought a lawsuit on behalf of the state under the Medicaid False Claim Act and Health Care False Claim Act arguing that making a greater profit margin on generic drugs compared to brand name drugs violates the Public Health Code.  The qui tam plaintiffs seek to recover any excess charges from over a dozen national pharmacies, such as Wal-Mart Stores and Rite Aid, and share in that recovery.

The court will receive briefing and argument on an unusually large number of issues, including one issue apparently raised solely in the amicus brief of the Michigan Chamber of Commerce.  The court intends to decide:

(1) whether MCL 333.17755(2) provides an implied private cause of action;

(2) what is meant by the requirement that a pharmacist shall “pass on the savings in cost” when the pharmacist dispenses a generically equivalent drug product and what constitutes a violation of that requirement;

(3) whether this requirement is limited to transactions involving a substitution of a generic drug for a name brand drug, and in this regard, whether § 17755(2) must be read in conjunction with the other subsections of MCL 333.17755;

(4) whether submission of a charge for the dispensing of a generic drug that is in violation of this requirement constitutes the making of a false claim under the Medicaid False Claim Act (MFCA), MCL 400.601 et seq. or the Health Care False Claim Act (HCFCA), MCL 752.1001 et seq.;

(5) whether use of the remedies provided by the MFCA and the HCFCA is available when Part 177 of the Michigan Public Health Code, MCL 333.17701 et seq. provides administrative remedies for violations of MCL 333.17755;

(6) whether the plaintiffs satisfied the heightened pleading requirement applicable to these actions under MCR 2.112(B)(1); and

(7) whether plaintiff Marcia Gurganus is qualified to bring a qui tam action in light of the limitations found at MCL 400.610a(13).

Disclaimer:  Warner Norcross & Judd filed the amicus brief on behalf of the Michigan Chamber of Commerce, which raised the issue of administrative remedies.

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