Last Wednesday the Seventh Circuit affirmed the dismissal of a whistleblower suit brought by a pharmacist against his former employer, the Shopko pharmacy chain, for what he alleged was fraudulent billing of Medicaid by Shopko stores across the nation.

Carl Thulin’s theory was imaginative—and complicated.  It concerned the bills that a pharmacy sends to Medicaid for prescriptions bought by “dual-eligibles”—customers who have coverage by both private insurance and Medicaid, with Medicaid paying the amount above what the insurer pays.  The court explained it with an example:  A drug has a list price of $50.  An insurer negotiates a price of $25 with Shopko—$20 from the insurer and a $5 co-pay.  Medicaid negotiates a price of $30.  The customer buys the drug, making no co-payment.  Shopko, having received $20, bills Medicaid for $10—the difference between $20 and the $30 price negotiated with Medicaid.

Carl’s theory was that Shopko’s $10 bill to Medicaid was fraudulent.  Why?  Because all Medicaid recipients have assigned their rights under private insurance to Medicaid.  So in our example, Carl reasoned, the customer has assigned Medicaid the right to get the drug for $25, as negotiated by the insurer.  Shopko knows that and knows it should bill Medicaid only for the $5 rather than for $10.  So the bill for $10 is a false claim.

The Seventh Circuit didn’t like Carl’s theory any better than the district court did.  It affirmed the dismissal, ruling that the $10 bill was not a false claim and that it is Medicaid’s responsibility to review such bills and make a determination how much it should pay.

The case is Thulin v. Shopko Stores, 2014 BL 318642, No. 13-3638 (7th Cir. Nov. 12, 2014).