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Justices side with whistleblowers in fraud cases against SuperValu, Safeway

The high court said the whistleblowers had shown the companies knew they were submitting potentially false claims about their prescription drug prices to the government.

WASHINGTON (CN) — The Supreme Court on Thursday revived two cases filed by supermarket whistleblowers who say that SuperValu and Safeway fraudulently reported drug prices to get bigger reimbursements from the government.

Justice Clarence Thomas wrote the unanimous court's opinion siding with the whistleblowers, who argued in April that both grocery chains seem to have known their price reporting was wrong when they sent it in to the government, a clear violation of the False Claims Act.

“It is enough if respondents believed that their claims were not accurate,” Thomas wrote in the 17-page opinion.

When a federal judge entered summary judgment for SuperValu, he did not dispute that store had misreported the drug prices. Because of some ambiguity in price-reporting requirements, however, the district court determined that that such misreporting could be chalked up to an objectively reasonable misunderstanding.

Pharmacist whistleblowers Tracy Schutte and Michael Yarberry, who could recover three times whatever the government paid because of fraud, appealed to the Supreme Court after a divided Seventh Circuit panel ruled against them. Tejinder Singh, an attorney with Sparacino, represented the SuperValu pharmacists and former Safeway pharmacist Thomas Proctor.

In the case of SuperValu, customers paid less than the amount advertised — and reported to Medicare and Medicaid — because the store price-matched to entice more customers. The program was so successful that it brought in more than 6 million price matches over the course of a decade, Schutte and Yarberry's petition notes. Because these discounts were offered so frequently, the pharmacists say the discounted prices became the "usual and customary" one, as it's known in the law, and thus the one that the store should have reported to regulators,

Carter Phillips of Sidley Austin defended Safeway and SuperValu at arguments, maintaining that the "usual and customary price" both chains reported was what they felt was correct.

But Thomas shot down the pharmacy chains’ reasoning Thursday.

“Rather than saying, ‘this is what ‛usual and customary’ means,’ respondents essentially said, ‘this is what our ‛usual and customary’ prices are,’” the justice explained. “In doing so, they plainly implied facts about their prices that were not known to the plan sponsors, pharmacy benefit managers, and state Medicaid agencies that received their claims. Petitioners’ cases thus make out a valid fraud theory even under respondents’ common-law rule.”

In their opposition brief, SuperValu and Safeway had maintained that their programs were "aimed at helping uninsured and underinsured customers afford prescription drugs.”

“SuperValu began price matching in the 1980s, and Safeway started two decades later,” the brief states. Price matching began to fall out of practice, the supermarkets say, only after competitors began refusing to verify their prices, making it hard for pharmacists to ascertain discounts.

The Department of Justice sided with the whistleblowers in this case.

Neither Singh nor Phillips immediately responded to a message seeking comment on the ruling Thursday.

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Categories / Appeals, Business, Government, Health

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