U.S. District Court Issues False Claims Act Judgment for Defendants in Case Challenging Competitive Bidding for DME Contract

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After a fourteen-day bench trial, a Mississippi federal court in United States ex rel. Jamison v. McKesson Corp., et al., Civ. A. No. 2:08-cv-214-SA-JMV (N.D. Miss. Sept. 28, 2012), rendered a complete verdict for the defense, holding that in this federal False Claims Act case based on the Anti-Kickback Statute (“AKS”) , the United States had failed to carry its burden to prove that illegal remuneration had been offered or accepted, or that any defendant had acted with the scienter required by the AKS. While much of the Court’s verdict in this intervened case turned on facts and circumstances particular to the case, the Court’s assessment of what is required to prove remuneration and scienter has important implications for companies that may face similar allegations.

What is – and what is not – “remuneration” under the AKS?

The focus of the trial was on two DME supply contracts between subsidiaries of McKesson Corporation and entities representing Beverly Enterprises, an operator of skilled nursing facilities. For each contract, the government’s theory was that the prospect of another contract or other business with Beverly was successfully “dangled” in front of the McKesson subsidiaries in order to induce below fair market value, below cost, or discounted bids from the McKesson defendants. While the theory that a business opportunity can constitute “remuneration” under the AKS is not new, see, e.g., United States v. Bay State Ambulance and Hosp. Rental Serv., 874 F.2d 20, 29 (1st Cir. 1989), pursuing the theory in this case was aggressive, and the Court rejected it for good reason.

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