On September 16, 2013, Quest Diagnostics Inc. (Quest) asked a Virginia state court to dismiss a qui tam action alleging that Quest violated the Virginia Fraud Against Taxpayers Act (VFATA) by submitting charges to Virginia Medicaid that are higher than the lowest rates Quest provides to other customers and that it violated the federal Anti-Kickback Statute by offering discounts to other customers as an inducement for referrals of Medicaid business. A detailed discussion of the relator’s complaint is available here.
Quest argued that the relator failed to state a claim because no statutory or regulatory provision requires laboratories to charge their “lowest rates” to state Medicaid. Instead, applicable regulations merely require laboratories to charge Medicaid the same prices as the general public – which Quest claims is the “list price to cash-paying patients” and not discounts negotiated with other customers. Notably, earlier this year, Huron Consulting Group raised a similar argument and won in a case brought against it under the federal and NY FCA in New York federal court. In United States ex rel. Associates Against Outlier Fraud v. Huron Consulting Group, Inc., the court held that the relator could not assert that Huron caused the submission of false charges because there was no rule, regulation or standard governing how hospitals should set their charges and how those charges must be related to hospital costs. A detailed discussion of the New York federal court’s opinion is available here.
Quest also argued that the relator did not satisfy Federal Rule of Civil Procedure 9(b) because the complaint does not set forth detailed allegations about the allegedly false claims submitted to Virginia Medicaid or the allegedly lower prices charged to non-Medicaid purchasers. Similarly, Quest argued the complaint fails to plead with particularity any alleged kickbacks, including what inducements were offered, when, or to whom.
Finally, Quest argued that relator’s claims based on conduct before January 1, 2003, (VFATA’s effective date) should be dismissed because the VFATA is not retroactive.
The trial will held four to eight weeks after the final pre-trial conference, currently scheduled for January 16, 2014.