The U.S. District Court for the Northern District of Florida recently held that a False Claims Act suit can proceed against a Florida pharmacy and its owner, rejecting in particular the owner’s arguments that the complaint did not sufficiently allege that he acted with improper intent or caused the submission of false claims.

The government filed a complaint-in-partial-intervention that Oldsmar Pharmacy and its owner Larry Smith engaged in a kickback scheme to defraud Tricare by paying commission to marketers and sales representatives in exchange for prescriptions sold and filled through Oldsmar. Specifically, the complaint alleges that Oldsmar entered into an arrangement with Centurion Compounding, Inc. under which the companies would split profits of prescriptions filled by Oldsmar in exchange for referrals. Under this arrangement, Centurion engaged sales representatives to market compounded medications to Tricare beneficiaries and directed its sales representatives and in-network physicians to send prescriptions to Centurion, which would in turn send the scripts to Oldsmar to fulfill. Smith, then President of Oldsmar, allegedly negotiated the commission agreement, and directly encouraged physicians to prescribe medications to be filled by Oldsmar.

The Court evaluated whether Smith knowingly caused the submission of false claims. Holding as a threshold matter that Smith can be liable for false claims even if he did not personally submit the false claims, the Court found Smith’s direct involvement in the underlying kickback arrangement – negotiating the agreement with Centurion and speaking with marketers about what prescriptions should be issued to maximize reimbursement rates – was enough to establish causation. In reaching this conclusion, the Court did not address the growing trend of cases that also require the FCA complaint to “point to at least one claim” rendered false or fraudulent by an alleged kickback scheme in order to proceed.

The court also rejected Smith’s argument that the government failed adequately to allege that he acted with improper intent. Citing Rule 9(b)’s general standard for alleging scienter, the Court found that Smith’s independent research into anti-kickback laws and experience in the health care industry demonstrated a general knowledge of the illegality of kickback schemes.