United States of America, ex rel. v. Om Nicare Inc.

PRECEDENTIAL
UNITED STATES COURT OF
APPEALS
FOR THE THIRD CIRCUIT
03-2187
UNITED STATES OF AMERICA, ex
rel.;
THOMAS G. QUINN, BRINGING
THIS CAUSE OF ACTION ON
BEHALF OF
THE UNITED STATES OF AMERICA
v.
OM NICARE INC.;
POMPTON NURSING HOME
SUPPLIERS, INC.,
(A WHOLLY-OWNED SUBSIDIARY
OF OMNICARE, INC.);
ALAN TRASTER, INDIVIDUALLY
AND IN HIS CAPACITIES
AS AN OFFICER OF OMNICARE,
INC. AND POMPTON
NURSING HOME SUPPLIERS AND
VARIOUS JOHN DOE
COMPANIES WHO PROCESS
MEDICATIONS RETURNED FROM
PATIENTS AT LONG-TERM CARE
FACILITIES LOCATED IN
THE STATE OF NEW JERSEY
PURSUANT TO THEIR
CONTRACTUAL
RELATIONS WITH NEW JERSEY
MEDICAID/PAAD PROGRAMS;
CHERRY HILL PHARMACY, LTC,
(A WHOLLY-OWNED SUBSIDIARY
OF OMNICARE, INC.);
WINSLOW'S PHARMACY,
(A WHOLLY-OWNED SUBSIDIARY
OF OMNICARE, INC.);
BACH'S PHARMACY EAST
Thomas G. Quinn,
Appellant
_______________
Appeal from the United States
District Court
for the District of New Jersey
(D.C. No. 98-cv-02031)
District Judge: Honorable Dickinson R.
Debevoise
Argued on December 16, 2003
Before: ROTH, MCKEE and ROSENN,
Circuit Judges
(Opinion filed : September 1, 2004)
Harvey S. Mars, Esquire (Argued)
Leibowitz & Mars
322 West 48th Street
New York, NY 10036
Counsel for Appellant
Harry R. Silver, Esquire (Argued)
Patton Boggs
2550 M. Street, N.W.
Washington, D.C. 20037
James A. Robertson, Esquire
Kalison, McBride, Jackson & Murphy

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645 Martinsville Road
P.O. Box 814
Liberty Corner, NJ 07938
Peter S. Pearlman, Esquire
Jessica V. Henry, Esquire
Cohn, Lifland, Pearlman, Herrmann &
Knopf
Park 80 Plaza West - One
Saddle Brook, NJ 07663
E. John Steren, Esquire
Ober, Kaler, Grimes and Shriver
1401 H. Street, N.W.
Suite 500
Washington, D.C. 20005
Counsel for Appellees
O P I N I O N OF THE COURT
ROTH, Circuit Judge:
Omnicare, Inc., a Medicaid-
provider pharmacy, and various of its
subsidiaries, including Pompton Nursing
Home Suppliers (Pompton), were charged
by Thomas Quinn with submitting false
claims in violation of the False Claims Act
(FCA), 31 U.S.C. § 3729 et seq.1 Quinn
bases his allegations on the fact that
Medicaid pays for medications that the
defendant phar mac ies dispense to
Medicaid beneficiaries but, if a medication
is subsequently returned to a defendant
pharmacy for resale, the pharmacy credits
Medicaid with only 50% of what Medicaid
had paid the pharmacy for the medication.
We find that the lack of legal authority,
requiring Medicaid-provider pharmacies to
credit Medicaid when a medication is
returned for resale, is disturbing. We
conclude, however, that there can be no
FCA liability in the absence of such
authority. In addition, Quinn’s failure to
present evidence of the actual submission
of a single false claim to Medicaid is fatal
to this qui tam action.
I. FACTUAL BACKGROUND
Pompton is a Medicaid-provider
pharmacy that provides medications to
individuals residing in long-term care
facilities. Long-term care facilities, which
include nursing homes, provide care to
patients who participate in medical
insurance programs, including Medicaid.
1 The complaint also named Alan
Traster; Bach’s Pharmacy, East; Cherry
Hill Pharmacy and Winslow’s Pharmacy
as defendants. Pompton and Bach’s
Pharmacy, East are the same entities.
Cherry Hill Pharmacy and W inslow’s
Pharmacy are also subsidiaries of
Omnicare. The District Court, in
analyzing Quinn’s claims, focused solely
on Pompton’s recycling and crediting
practices because Quinn worked at
Pompton and did not advance a theory of
FCA liability against any other Omnicare
subsidiary that was not advanced against
Pompton. For the same reason, we too
will focus solely on Pompton’s recycling
and crediting practices.

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Approximately sixty percent of the
medications that Pompton dispenses are
paid for by New Jersey Medicaid.2 The
remainder are paid for by the patients
themselves or by private insurers. After a
Medicaid-provider pharmacy has supplied
a medication to a Medicaid patient, the
pharmacy submits a claim to Medicaid.
Medicaid then pays the pharmacy for the
medication. Instructions for filing
Medicaid claims are set forth in New
Jersey Medicaid’s Pharmacy Services
Fiscal Agent Billing Supplement (FABS).
FABS instructs provider pharmacies to
submit Medicaid pharmacy claims on the
MC-6 form. The MC-6 claim form
contains a “Provider Certification” which
the provider must sign:
I certify that the services
covered by this claim were
personally rendered by me
o r u n d e r m y d i r e ct
supervision . . . and that the
services covered by this
claim and the amount
charged thereof are in
a c c o r d a n c e w i t h t h e
regulations of the New
Jersey Health Services
Program3; and that no part
of the net amount payable
under this claim has been
paid; and that payment of
such a m ou n t w ill be
accepted as payment in full
without additional charge to
the patient or to others on
his behalf . . .. I understand
that . . . any false claims,
statements or documents, or
concealment of a material
fact, may be prosecuted
under applicable federal or
State law, or both.
O n s o m e o c c a sions, th e
medications, for which Pompton has
submitted a claim and received full
reimbursement from Medicaid, are
returned.4 New Jersey pharmacy
regulations allow Medicaid provider
pharmacies to recycle returned unit dose
packaged medications if they have been
stored properly and the seal and control
number remain intact. See N.J.A.C. §
13:39-9.15.5 When Pompton receives
returned medications for recycling, it is
Pompton’s practice to send Medicaid a
2 Medicaid services are financed by
the state governments and the federal
government. In New Jersey, the Division
of Medical Assistance and Health
Services (DMAHS) administers the
program.
3 The New Jersey Health Services
Program is Medicaid. See N.J. STAT.
ANN. § 30:4D-3.
4 A change in the patient’s
medication, the death of a patient, or the
transfer of a patient out of a long-term
care facility are common reasons why
medications are returned.
5 Recycling involves restocking and
redispensing the returned medications.
Unit dose packaging means single tablets
contained in sealed blister packs.

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check for 50% of the cost of the returned
medications.6 Pompton justifies retaining
the other 50% to cover the expense of
restocking an d r e d i sp e n sing th e
medications.
The qui tam plaintiff, Thomas
Q u i n n , was P o m p t o n ’ s r e g io n a l
comptroller. Quinn alleges that it was
Pompton’s practice, when medications
were returned, to push out the individual
tablets and capsules from their sealed
packages and place them in separate
containers for subsequent use. Quinn
claims that he observed workers in the
return department removing pills from
their original sealed containers by pushing
them through their packaging and that he
saw the workers create new packages for
the pills by re-sealing the packages with
irons. Quinn asserts that Pompton
eventually redispensed the returned
medications.
After Quinn learned that another
recently acquired Omnicare subsidiary in
Illinois had settled FCA claims because it
had represented to Medicaid that
medications were destroyed when they in
fact had been returned and redispensed, he
became concerned about Pompton’s
Medicaid recycling and crediting practices.
He expressed his concern to Alan Traster,
the president of Pompton, who told Quinn
that Pompton was not required to credit
New Jersey Medicaid for returned
medications. Quinn memorialized his
concerns in a memo to Traster. Quinn was
dismissed by Pompton a few days later on
August 22, 1997.
II. PROCEDURAL HISTORY
Quinn filed a complaint under seal
against Pompton in the United States
District Court for the District of New
Jersey. Quinn brought the action under the
qui tam provisions of the False Claims
Act, 31 U.S.C. § 3729 et seq.,7 under New
Jersey’s Co nscien tiou s E m pl oye e
Protection Act (CEPA), N.J.S.A. § 34:19-
3, and under New Jersey common law.
Quinn claimed that Pompton violated §§
3729(a)(1), (2), and (7) of the FCA
because it (1) failed “to submit
adjustments in order to partially void
claims (submitted on required MC-6 claim
forms) where the medications supplied
pursuant to those claims were ultimately
returned,” (2) sold “Medicaid the same
medication twice,” (3) sub mitted
“Medicaid claims for pharmaceuticals that
6 Pompton “inadvertently” credited
New Jersey Medicaid only 25% between
November 1996 and September 1997.
7 The FCA allows a private citizen,
called a relator, to bring an action in the
name of the United States, and the
government may intervene if it so
chooses. See 31 U.S.C. §§ 3730(b)(1),
(2). In this case, the government did not
intervene. The FCA permits the relator
to bring the action in the absence of the
government’s intervention. Quinn is
entitled to collect at least 25 percent but
not more than 30 percent of the proceeds
of the action or settlement. See id. §§
3730(b)(4)(B), (d)(2).

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were removed from unit dose packaging in
the recycling process, in violation of New
Jersey Board of Pharmacy Regulations”,
and (4) returned “credits to Medicaid for
less than 100% of the amount initially
claimed for returned medications.” United
States ex rel. Quinn v. Omnicare, Inc., No.
98-2031 (DRD), slip op. at 9-10 (D.N.J.
filed March 28, 2003). Quinn claimed that
his dismissal violated the anti-retaliation
provisions of the FCA and CEPA. Quinn
also brought a claim for unjust enrichment.
On cross-motions for summary
judgment, the District Court granted
summary judgment to Pompton on Quinn’s
FCA claims and his unjust enrichment
claim. The court declined to exercise
supplemental jurisdiction over Quinn’s
CEPA claim and dismissed it for lack of
subject matter jurisdiction.
Quinn appeals the adverse
disposition of his FCA claims.8
III. JURISDICTION AND
STANDARD OF REVIEW
The District Court had jurisdiction
pursuant to 28 U.S.C. § 1331 and 31
U.S.C. § 3732(a). We have appellate
jurisdiction pursuant to 28 U.S.C. § 1291.
We exercise plenary review over
the District Court’s decision granting
summary judgment and will use the same
test applied below. Belitskus v.
Pizzingrilli, 343 F.3d 632, 639 (3d Cir.
2003). A district court may grant summary
judgment when there is no genuine issue
of material fact and the moving party is
entitled to judgment as a matter of law.
Fed. R. Civ. P. 56(c). The moving party
bears the burden to show an absence of
any genuine issues of material fact.
“[I]nferences to be drawn from the
underlying facts contained in the evidential
sources . . . must be viewed in the light
most favorable” to the non-moving party.
Hollinger v. Wagner Mining Equipment
Co., 667 F.2d 402, 405 (3d Cir. 1981).
“[I]f a disputed fact exists which might
affect the outcome of the suit under the
controlling substantive law,” summary
judgment is not appropriate. Belitskus,
343 F.3d at 639 (citation omitted). Any
doubt a court has about the existence of a
genuine issue of material fact should be
resolved in the non-moving party’s favor.
Continental Ins. Co. v. Bodie, 682 F.2d
436, 438 (3d Cir. 1982). Summary
judgment is appropriate when there is no
genuine issue of material fact to be
resolved at trial. Gruenke v. Seip, 225
F.3d 290, 298 (3d Cir. 2000).
IV. DISCUSSION
A. The Submission of the Initial
Medicaid Claim
The FCA imposes liability on any
person who
(1) knowingly presents, or
causes to be presented, to an
officer or employee of the
United States Government .
. . a false or fraudulent claim
8 Quinn does not appeal the District
Court’s entry of summary judgment on
his FCA retaliation claim.

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for payment or approval;
(2) knowingly makes, uses,
or causes to be made or
used, a false record or
statement to get a false or
fraudulent claim paid or
a p p r o v e d b y t h e
Government . . ..
31 U.S.C. §§ 3729(a)(1), (2). A person
acts “knowingly” when he “(1) has actual
knowledge of the information; (2) acts in
deliberate ignorance of the truth or falsity
of the information; or (3) acts in reckless
disregard of the truth or falsity of the
information, and no proof of specific
intent to defraud is required.” 31 U.S.C. §
3729(b).
Each time Pompton submits a claim
for payment on the MC-6 form, it certifies
that “the services covered by this claim
were . . . rendered . . . and . . . the services
covered by this claim and the amount
charged thereof are in accordance with . .
. [Medicaid] regulations . . ..” Quinn
alleges that Pompton’s initial claims are
false due to its failure to adjust them when
medications are returned for recycling.
There are several regulatory
provisions which do require the voiding or
adjustment of claims under certain
circumstances. Section 10:49-8.3 of the
New Jersey Administrative Code requires
“[a]djustments following payment of
claims” when “a claim is incorrectly paid
and the provider receives an overpayment
or underpayment” or when a claim is “paid
in error.” Situations that may cause
underpayment or overpayment include a
payment by a private insurance company
after Medicaid has paid for the medication,
a billing error, or a computer error in
processing the claim. A claim is “paid in
error” when it is paid and it should not
have been paid. See N.J.A.C. § 10:49-
8.3(b). In addition, N.J.A.C. §10:51-
1.25(j)(2) requires “[p]harmacies . . . to
initiate claim reversal for those services in
which a claim was generated and
adjudicated to payment . . . and the service
was not subsequently provided to a . . .
beneficiary.”
FABS instructs the pharmacy to fill
out an “Adjustment Request” form when a
claim is underpaid, overpaid, or paid in
error. In the case of a claim that is paid in
error, the pharmacy voids the entire claim
and Medicaid deducts the voided amount
from the next payment. The provider
indicates on the “Adjustment Request”
form the reason for the adjustment or void.
One of the reasons listed is “service not
provided.” None of these regulations,
however, instruct pharmacies on how to
credit or adjust a claim for medications
after those medications have been returned
for recycling.
Nevertheless, Quinn contends that
Pompton violates §§ 3729(a)(1) and (2) of
the FCA by failing to void or adjust claims
for medications after these medications
have been returned for redispensing.
Quinn argues that the initial claims
become false when medications have been
returned because the claims then become
claims for services that were not provided
to the intended beneficiaries. Quinn
asserts that, after the return of the
medications, unless Pompton reverses the

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claims as required by N.J.A.C. § 10:51-
1.25, the certification on the initial MC-6
form is a false one.
The District Court rejected Quinn’s
argument because there is no language in
the MC-6 form, its instructions, or
Medicaid regulations that states that
medications cannot be returned. Quinn,
slip op. at 11. The court noted that, even
though N.J.A.C. § 10:51-1.25(j)(2)
requires reversal when “services are not
provided,” the regulation does not further
state that “services are not provided” when
m e d i c a t i o n s a r e d i sp e n s e d a n d
subsequently returned. Id. at 11-12.
We agree that there is no regulatory
requirement of the reversal of a claim once
a medication has been returned. As the
District Court held, if there is no
requirement to adjust the claim, there is no
liability for a failure to do so.
H o w e v e r , e v e n m o r e
fundamentally, Quinn’s allegation is that
the initial claim is rendered false by the
return. The fallacy of this argument lies in
the fact that the return of a medication,
which at the outset has been dispensed to
the Medicaid beneficiary, does not render
the initial claim false or fraudulent. In
order to prove FCA liability under §§
3729(a)(1) and (2), Quinn must prove that
“(1) the defendant presented or caused to
be presented to an agent of the United
States a claim for payment; (2) the claim
was false or fraudulent; and (3) the
defendant knew the claim was false or
fraudulent.” Hutchins v. Wilentz, Goldman
& Spitzer, 253 F.3 176, 182 (3d Cir. 2001).
There is no question that the MC-6 forms
Pompton submits to Medicaid are claims
under the FCA.9 The only question is
whether a claim, which is not “false” or
“fraudulent” when initially submitted, can
later be rendered so if the medication is
returned.
There is FCA liability when a
“provider knowingly asks the Government
to pay amounts it does not owe.” United
States ex rel. Clausen v. Lab. Corp. of
America, 290 F.3d 1301, 1311 (11th Cir.
2002). The FCA reaches “all fraudulent
attempts to cause the Government to pay
out sums of money.” Harrison v.
Westinghouse Savannah River, 176 F.3d
776, 788 (4th Cir. 1999). The terms “false”
and “fraudulent” are not defined in the
FCA. The terms, however, do have
independent meanings:
A common definition of
“fraud” is an intentional
9 “Claim” is defined as:
[A]ny request or demand,
whether under contract or
otherwise, for money or
property which is made to a
contractor, grantee, or
other recipient if the
United States Government
provides any portion of the
money or property which is
requested or demanded, or
if the Government will
reimburse such contractor,
grantee, or other recipient
for any portion of the
money or property which is
requested or demanded.
31 U.S.C. § 3729(c).

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m i s r e p r e s e n t a t i o n ,
c o n c e a l m e n t , o r
nondisclosure f or th e
purpose of inducing another
in reliance upon it to part
with some valuable thing
belonging to him or to
surrender a legal right.”
“False” can mean “not true,”
“deceitful,” or “tending to
mislead.” The juxtaposition
of the word “false” with the
word “fraudulent,” plus the
meanings of the words
comprising the phrase “false
claim,” suggest an improper
claim is aimed at extracting
money the government
otherwise would not have
paid.
Mikes v. Straus, 274 F.3d 687, 695 (2nd
Cir. 2001) (citations omitted).
Under these standards, it is clear
that, when Pompton submits the initial
claim form, it is not intentionally making
any misrepresentation. To the contrary, it
is merely asking for reimbursement for
medication which it has dispensed and for
which it is entitled to payment. When
Pompton submits the initial claim for
payment, it has no way of knowing if a
medication will be returned. Pompton has
not then “knowingly” presented a “false or
fraudulent claim” at the time of the
original claim submission. Nor can the
changed circumstances, caused by the later
return of the medication, render the initial
claim false or fraudulent.
Quinn contends, however, that, in
order to impose FCA liability, it is not
necessary that the claim have been false
when it was originally submitted. We
reject this argument. The FCA aims to
impose liability for a broad range of
conduct, including “each and every claim
submitted . . . which was originally
obtained by means of false statements or
other corrupt or fraudulent conduct.”
S.Rep.No. 99-345 at 9 (1986), reprinted in
1986 U.S.C.C.A.N. 5266, 5274 (emphasis
added). Pompton’s claims were not
originally false – they did not misrepresent
the dispensing of the medication or the
cost of what was dispensed.
We conclude that we would be
exceeding the intent of Congress in
defining false claims if we were to permit
the transforming of a valid claim into a
false claim by the occurrence of a
subsequent fortuitous event which is not
itself the basis of any required adjustment.
For the above reasons, we hold that
Pompton is not liable under the FCA for
the submission of the initial Medicaid
claims or for the failure to adjust an initial
claim when a medication is returned.
B.The Successive Claim for a Recycled
Medication
In Quinn’s second allegation, he
contends that, when a returned medication
is resold, Pompton is making a claim for
an amount that has, at least in part, already
been paid. The MC-6 form requires
Pompton to certify that “no part of the net
amount payable under this claim has been
paid.” Quinn asserts that Pompton submits
a false claim to Medicaid when Pompton

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sells a medication to a Medicaid patient for
the second time. Quinn alleges that by
only partially crediting Medicaid for a
returned medication and then submitting a
new claim for the full cost of the same
medication, Pompton violates §§
3739(a)(1) and (2) of the FCA because
Pompton has claimed more than the actual
cost of the medication and has falsely
represented on the second claim form that
there has been no previous payment for the
medication.
The District Court rejected this
argument. The court refused to find FCA
liability under Quinn’s theory that
Pompton must have resold returned
medications to Medicaid by virtue of the
large volume of Medicaid business it
conducts. Quinn, slip op. at 12. The
court, relying on Clausen, 290 F.2d 1311,
to support the theory that the actual
submission of a false claim must be
proved, noted that Quinn did not point to a
single instance when the same medication
was in fact the subject of two claims.10
The District Court held that, without
evidence of the actual submission of a
false claim, there was no genuine issue of
material fact.
Quinn argues that there is a material
question of fact whether Pompton
submitted duplicate Medicaid claims for
the same medication, given that Pompton
recycles returned medications and
approximately 60% of Pompton’s sales are
to Medicaid. Pompton responds that, at
the summary judgment stage, Quinn has
the “burden to establish, in at least one
instance, that a given pharmaceutical had
been paid for by Medicaid, returned to the
pharmacy, and then redispensed and
rebilled to Medicaid.” We agree and
conclude that Quinn has not met this
burden.
In Clausen, the court held that a
False Claims Act plaintiff cannot “merely
. . . describe a private scheme in detail but
then . . . allege simply and without any
stated reason for his belief that claims
requesting illegal payments must have
submitted, were likely submitted or should
have been submitted to the Government.”
290 F.3d at 1311. Clausen alleged that
the defendant medical testing company
was overbilling the government by
performing unauthorized, unnecessary, and
excessive testing. The court affirmed the
dismissal of Clausen’s claim because he
never provided a single false claim was
actually submitted. Id. at 1312.
10Quinn asserts that the District Court
erred by relying on Clausen. Whereas
the dismissal in Clausen was pursuant to
Federal Rule of Civil Procedure 9(b) for
failure to plead fraud with particularity,
Quinn points out that the District Court
held that his complaint satisfied Rule
9(b)’s requirements. The present case
differs from Clausen, however, because
Clausen was dismissed on the pleadings
for failure to satisfy the pleading
requirements of Fed. R. Civ. P. Rule
9(b). While Quinn survived this first
step, he then succumbed at the summary
judgment stage for failure to establish a
necessary element of FCA liability.

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Similarly, in United States ex rel.
Alfatooni v. Kitsap Physicians Service, the
Ninth Circuit Court of Appeals held that
the plaintiff’s failure to present an actual
false claim submitted to the government
was fatal to the action. 314 F.3d 995 (9th
Cir. 2002). Alfatooni, relying on the
volume of bills submitted to the
Government each year, made the same
argument Quinn makes here – that false
claims must have been submitted. The
court held that an FCA plaintiff must come
to court with a “claim in hand” and
“generalized, speculative suppositions”
will not suffice. Id. at 1002-03. The court
contrasted United States v. Krizek, 192
F.3d 1024 (D.C.Cir. 1999), in which the
court “presumed that the defendants would
be liable under the False Claims Act for
submitting psychiatric bills that totaled
more than twenty four hours for a given
day.” Alfatooni, 314 F.3d at 1003 (citing
Krizek, 192 F.3d at 1026-27). The court in
Alfatooni noted that in Krizek, “[t]he
government had the Medicare/Medicaid
claims in hand,” id. (citing Krizek, 192
F.3d at 1027-28), even though it could not
prove exactly which of the “claims in
hand” actually was fraudulent.
The same reasoning applies here.
Pompton admits that approximately 60
percent of its business is Medicaid and that
it accepts returned medications for
recycling. However, as Alfatooni failed to
do, Quinn also did not come forward with
a single claim that Pompton actually
submitted to Medicaid which covered a
medication for which Pompton had
previously submitted a claim. Discovery
was complete at the time Pompton moved
for summary judgment, and Quinn did not
ask the District Court for extended
discovery pursuant to Federal Rule of Civil
Procedure 56(f). Quinn failed to link
Pompton’s recycling and crediting
practices to the actual submission of a
false claim. Without proof of an actual
claim, there is no issue of material fact to
be decided by a jury. Quinn’s theory that
the claims “must have been” submitted
cannot survive a motion for summary
judgment.
Furthermore, we agree with the
District Court that, even assuming that
Pompton is submitting successive claims
for the same medications, there can be no
FCA liability because New Jersey
regulations entitle Pompton to recycle and
redispense returned medications. Section
13:39-9.15(a)(2) of the New Jersey
Administrative Code, entitled “Disposal of
unused medications,” allows unused unit
dose packaged medication, that “has been
stored in a medication room or secure area
in the institution . . . [with the] seal and
control number . . . intact” to be “recycled
and redispensed.” The regulation does
not, however, require pharmacies to credit
M edica id for th e “recycled and
redispensed” medications. Because
Pompton can legally recycle returned
medications, the initial sale and the
subsequent sale of a returned medication
are properly viewed as separate
transactions. As the District Court held,
these transactions are “not duplicative in
any sense that would make them
inconsistent with the fu ll-payment
representation on the MC-6.” Quinn, slip
op. at 13. Under this separate transaction

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theory, Pompton does not make a false
representation on the second claim form
even though it does not state that Medicaid
has already paid, at least in part, for a
redispensed medication.
In so concluding, we recognize that
the second claim would be submitted to
Medicaid for payment for the same
medication. When Pompton submits the
second claim, it knows that the medication,
which is the subject of that claim, was
already dispensed once and returned.
Pompton also knows that Medicaid has
already paid 50% of the cost of the
medication. However, because New
Jersey regulations allow Pompton to
recycle returned medications and because
no regulation requires Pompton and other
Medicaid pharmacies to credit Medicaid
for the returns, we conclude that we cannot
impose FCA liability based on the
submission of the second claim.
C.The Recycling of Repackaged
Medications
The MC-6 form requires Pompton
to certify that the “services covered by this
claim and the amount charged thereof are
in accordance with . . . [Medicaid]
regulations . . ..” Quinn argues that
Pompton violated §§ 3729(a)(1) and (2) of
the New Jersey Administrative Code when
it submitted claims to Medicaid because
the certification on the claim constituted
an implied false certification that the
returned medication was recycled in
accordance with “regulations.”
The “certification theory” of FCA
liability is based on a false representation
of compliance with a contract term,
statute, or regulation – when payment is
conditioned on compliance with that
requirement. See, e.g., United States ex
rel. Siewick v. Jamieson Sci & Eng’g, Inc.,
214 F.3d 1372, 1376 (D.C. Cir. 2000).11
We have not yet adopted this theory of
FCA liability. However, other Courts of
Appeals have. The Second Circuit noted
in Mikes that it was joining the “Fourth,
Fifth, Ninth, and District of Columbia
Circuits in ruling that a claim under the
Act is legally false only where a party
certifies compliance with a statute or
regulation as a condition to governmental
payment.” 274 F.3d at 697 (citations
omitted).
In Mikes, the court limited the
applicability of the implied false
certification theory to cases where “the
underlying statute or regulation upon
which the plaintiff relies expressly states
the provider must comply in order to be
paid.” 274 F.3d at 699. The court limited
FCA liability, premised on a legally false
certification, to those situations where a
party certifies compliance with an
underlying statute or regulation as a
condition of payment because the FCA
aims to impose liability only where a
certification of compliance influences the
11 Legally false certification is
different than factually false certification,
“which involves an incorrect description
of goods or services provided or a
request for reimbursement for goods or
services never provided.” Mikes, 274
F.3d at 697.

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12
government’s decision to pay. Id. at 697
(noting that the FCA “does not encompass
t h o s e i n s t a n c e s o f r e g u l a t o r y
noncompliance that are irrelevant to the
government’s disbursement decisions”).12
Under this approach, when an underlying
regulation expressly prohibits payment
upon non-compliance with its terms, the
submission of a claim implicitly certifies
compliance with that regulation.
District courts in the Third Circuit,
including the court in this case, have cited
Mikes in support of the concept of false
certification liability. See In re Genesis
Health Ventures, Inc., 272 B.R. 558, 569-
70 (Bankr. D. Del. 2002)13; United States
ex rel. Cooper v. Gentiva Health Servs,
Inc., No. 01-508, slip op. at 2-3, 2003 WL
22495607, (W.D.Pa. Nov. 4, 2003); United
States ex rel. Watson v. Connecticut Gen’l
Life Ins. Co., No. 98-6698, 2003 WL
303142, at * 10 (E.D.Pa. Feb. 11, 2003).
In support of imposing liability
under this theory, Quinn relies on § 13:39-
9 . 1 5 ( a )( 2 ) o f t h e N e w J e r s e y
Administrative Code, Board of Pharmacy
Regulations, which provides: “If a unit
dose packaged medication has been stored
in a medication room or secure area in the
institution and the medication seal and
control number are intact, the medication
may be recycled and redispensed.”
Medicaid regulations require pharmacies
to comply with Board of Pharmacy
Regulations in order to participate in the
Medicaid program. See N.J.A.C. § 10:51-
1.2(d) (expressly incorporating the
requirements of N.J.A.C. § 13:39).
The District Court held that failure
to comply with the Board of Pharmacy
regulations may disqualify a provider from
participation in the program, but
compliance with the regulations is not a
condition to payment by Medicaid. Quinn,
slip op. at 14-15. Quinn contends,
however, that a finding of FCA liability,
based on implied false certification theory,
should not be limited to situations where
12 The Second Circuit declined to
follow the broader approach taken in Ab-
Tech Construction, Inc. v. United States,
31 Fed. Cl. 429 (Fed. Cl. 1994), aff’d
without opinion, 57 F.3d 1084 (Fed. Cir.
1995), where “the Court of Federal
Claims held that the defendants’
submission of payment vouchers,
although containing no express
representation, implicitly certified their
continued adherence to the eligibility
requirements of a federal small business
statutory program.” Mikes, 274 F.3d at
699 (citing Ab-Tech, 31 Fed. Cl. at 434).
The Mikes court reasoned that “[t]he Ab-
Tech rationale . . . does not fit
comfortably into the health care context
because the False Claims Act was not
designed for use as a blunt instrument to
enforce compliance with all medical
regulations – but rather only those
regulations that are a precondition to
payment . . ..” 274 F.3d at 699.
13 The decision of the Bankruptcy
Court in Genesis Health Ventures was
affirmed by the District Court, .
This case is currently on appeal to this
Court.

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13
the underlying regulation or statute
expressly states that compliance is a
condition of payment. Quinn argues that
there should be FCA liability when non-
c ompliance wit h the u nder lying
regulations would disqualify the provider
from participation and that there should be
FCA liability here because the improper
recycling of medications would disqualify
Pompton from participation in the
Medicaid program.14
Here, the MC-6 form requires
providers to certify that the pharmaceutical
services
comply with Medicaid regulations. The
Medicaid regulations expressly incorporate
compliance with the Board of Pharmacy
Regulations, including N.J.A.C. § 13:39-
9.15, as a condition to participation in the
program. If a provider does not comply
with the Medicaid regulations, by reason
of not complying with the incorporated
Board of Pharmacy regulations, not only
will the provider be ineligible to
participate in the Medicaid program, but
Medicaid may seek to recover the money
it paid to the provider for services covered
by the claims. See N.J.A.C. § 10:49-
9.8(c).
Quinn’s arguments are compelling.
Even though § 13:39-9.15 does not
expr essly c o ndition payme nt o n
compliance with its terms, it hardly can be
said that non-compliance with its terms is
“irrelevant to the g over nm ent’ s
disbursement decisions.” Mikes, 274 F.3d
at 697. However, even if Pompton does
not qualify for Medicaid reimbursement if
it dispenses an improperly recycled
medication to a Medicaid patient, we
cannot say that, in this case, Pompton has
made any false certifications in connection
with a Medicaid claim. The reason we
come to this conclusion is because of the
impossibility of proving from the numbers
alone that a claim was made by Pompton
to Medicaid for an improperly recycled
medication.
If 100% of the medications that
Pompton dispensed were paid for by
Medicaid, then a fortiori, any claim for an
improperly recycled medication would be
paid for by Medicaid. If that claim was
made on Form MC-6, it would be
14 The United States filed a brief as
amicus curiae in the appeal of the
Bankruptcy Court’s decision in Genesis
Health Ventures, 272 B.R. 558. The
government refers to the 1986 Senate
Report, which states that “claims may be
false even though the services are
provided as claimed if, for example, the
claimant is ineligible to participate in the
program.” S.Rep.No. 99-345 at 9,
reprinted in 1986 U.S.C.C.A.N. 5266,
5274 (emphasis added). The report also
states that a false claim “may take many
forms, the most common being a claim
for goods or services not provided, or
provided in violation of contract terms,
specifications, statute or regulation.” Id.
The government argues that Congress
intended eligibility for program
participation and compliance with
contract terms, specifications, statutes or
regulations to be conditions which must
be met in order for claims to be true
under the FCA.

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14
inevitable that Pompton had violated
N.J.A.C. § 3729(a)(1) and (2), and
Medicaid would be paying Pompton on the
basis of a false certification. Such a
situation would be similar to the one in
Krizek, 192 F.3d 1024, where we know
that a false claim had to have been made
when 25 or more hours were being
charged to Medicaid for a 24 hour day.
In the present case, however, Quinn
cannot demonstrate either that an
improperly recycled medication was paid
for by Medicaid or that it was paid for by
one of the other sources of payment for the
medications that Pompton dispensed.
Although we might hypothesize that 60 %
of the improperly recycled medications
were paid for by Medicaid, it is impossible
to rule out the chance that they were paid
for by non-Medicaid sources.15 For this
reason, we agree with the District Court
that “even assuming that the MC-6
certified compliance with Board of
Pharmacy regulations as a condition of
payment, Plaintiff has not pointed to sales
inconsistent with the certification.” Quinn,
slip op. at 14. As with our discussion on
successive claims, Quinn did not provide
the District Court with a single instance
where Pompton submitted a claim for
payment for medications recycled in
violation of § 13:39-9.15.16 For that
reason, Quinn’s false certification claim
fails.
D. The Failure to Give Medicaid 100%
Credit for Returned Medications
15 We could even hypothesize that if
improperly recycled medications
comprised more that 40% of the
medications that Pompton dispensed, it
would be inevitable that a falsely
certified claim had been made to
Medicaid, the source of 60% of
Pompton’s receipts. There are, however,
insufficient facts in the record to support
even this more generous hypothesis.
16 We do find, however, that there
would be enough evidence in the record
to create a genuine issue of material fact
as to whether Pompton was recycling
unit dose packaged medications in
violation of N.J.A.C. § 13:39-9.15.
Quinn witnessed Pompton’s employees
recycling medications by removing pills
from their sealed packaging, placing the
pills in large containers, and then
resealing the pills in new packages using
an iron. The attorney for Pompton
admitted to the District Court at the
summary judgment hearing that returned
medications were repackaged. See
Transcript of Proceedings dated
November 25, 2002 at A7. This alone,
however, is insufficient to withstand
Pompton’s motion for summary
judgment. Quinn submits that every sale
has a proportion of recycled inventory
because recycled medications are
returned to inventory. Since at least 60%
of Pompton’s sales are to Medicaid
patients, Quinn argues that at least 60%
of the improperly recycled medications
must have been paid for by Medicaid.
As we discuss supra, however, this
“must have been” theory of liability
cannot serve as a basis for FCA liability.

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15
The reverse false claim provision of
the FCA imposes liability on any person
who “knowingly makes, uses, or causes to
be made or used, a false record or
statement to conceal, avoid, or decrease an
obligation to pay or transmit money or
property to the Government.” 31 U.S.C. §
3729(a)(7). To make a prima facie case of
liability under § 3729(a)(7), the plaintiff
must prove that the defendant did not pay
back to the government money or property
that it was obligated to return. The District
Court held that Pompton was not liable
under the reverse false claim provision
because it found that Pompton is under no
legal obligation to credit Medicaid for
returned medications. A prerequisite for
liability under this theory is a legal
obligation to credit Medicaid 100% for
returned medications. The District Court
noted that there is no federal or New
Jersey Medicaid statute or regulation
which specifically requires that Pompton
do so. Id., at 15-16.
Quinn asserts that Pompton’s
failure to give 100 % credit to Medicaid
violated § 3729(a)(7) of the FCA. Quinn
argues that § 8:39-29.4(j) of the New
Jersey Administrative Code imposes a
legal obligation on Pompton to credit
Medicaid for returned pharmaceuticals.
That section provides:
Where allowable by law, the
facility shall generate a crediting
mech a n ism for medications
dispensed in a unit-of-use drug
distribution system, or other system
that allows for the re-use of
medications. The crediting system
shall be monitored by the provider
p h a r m a c i s t a n d a f a c i l i t y
representative.
Pompton maintains that § 8:39-
29.4(j) does not impose an obligation to
credit Medicaid because Pompton is not a
“facility.” Quinn responds that § 8:39-
29.4(j) does require Pompton to credit
Medicaid for returned medications because
the definition of “facility” includes
pharmacies. Quinn argues that this section
requires Pompton to credit Medicaid 100%
because “credit” means “full credit,” and
“[i]f something less than full credit was
acceptable to the State, then the regulation
would have said so.”
As the District Court noted, “[i]t is
debatable whether . . . [N.J.A.C. § 8:39-
29-4(j)] even governs the conduct of
Medicaid pharmacies.” Section 8:39-29-
4(j) is a regulation promulgated by the
Department of Health and Senior Services,
not Medicaid. The regulation appears
under Chapter 39, which is titled
“Standards for Licensure of Long-Term
Care Facilities.” This alone suggests that
nursing homes, as opposed to pharmacies,
are required to create a “crediting
mechanism.”
The term “facility” is defined as “a
facility or distinct part of a facility licensed
by the New Jersey State Department of
Health and Senior Services as a long-term
care facility.” N.J.A.C. § 8:39-1.2.
Pompton is not a “facility” within this
definition because it is not licensed as a
long-term care facility. Furthermore, it
does not make sense for Pompton, a
pharmacy, to be considered a “facility”
within the regulation’s definition when, if

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16
it were considered a “facility,” it would, in
addition, have to maintain a pharmacy.
See id. § 8:39-29.1 (facilities “shall have a
consultant pharmacist and either a provider
pharmacist, or if the facility has an in-
h o u s e p h a r m a c y, a d ir e ctor of
pharmaceutical services”).
Although Pompton is not a
“facility,” the second sentence of the
regulation requires Pompton, because it is
a provider pharmacist, to monitor the
facility’s crediting system. See id. § 8:39-
29.4(j). Therefore, Pompton, acting as a
long-term care facility’s mandatory
pharmacy provider, does have an
obligation under this regulation to
“observe, watch, or check” the crediting
mechanism put in place by the long-term
care facility. See id. § 8:39-1.2. This
obligation to monitor, however, does not
expressly include an obligation to credit
Medicaid for returned medications.
Quinn cites two passages in the
New Jersey Register in support of his
argument that Pompton has an obligation
to credit Medicaid for returned
medications. The first passage states:
The Department anticip ate s
significant cost savings will accrue
as a result of N.J.A.C. § 8:39-
29.4(j) . . . The rule discontinues
the current requirement to destroy
all unused medications . . . [T]he
product is returnable and can be
dispensed again by the retail
pharmacy. Although no statewide
dollar impact is available, literally
thousands of dollars of medications
are destroyed by many facilities
monthly. Both private pay
consumers and the State Medicaid
program will benefit from this
proposed rule.
26 N.J.R. 1776 (Monday, May 2, 1994).
The other passage states:
The economic impact of this
amendment should result in savings
to residents and families and third
party payors such as Medicaid.
These savings will occur as a result
of drugs which will be returned to
the pharmacy for credit. Drugs
which have been . . . returned to the
pharmacy will be credited to that
resident . . . The overall savings to
residents, families and Medicaid
may exceed $200,000.
29 N.J.R. 4415(a) (Monday, October 20,
1997). These two passages do lend
support for Quinn’s argument that state
officials expected N.J.A.C. § 8:38-29.4(j)
to result in savings for Medicaid as a result
of crediting. It nevertheless is not clear
who has an obligation to credit and how
much credit is required to be given.
Even if the regulation imposed
upon Pompton an obligation to credit
Medicaid, as the District Court noted, “it
does not impose upon them a requirement
that they credit Medicaid any specific
amount for returned medications.” Quinn,
slip op. at 16. Quinn argues that credit
means 100%. We conclude, however, that,
in light of the absence of a clear obligation
to credit Medicaid and the absence of any
Medicaid or other regulation requiring
provider pharmacies to credit at a specific
rate, we can not impose FCA liability on

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17
Pompton.17
Quinn also argues that Pompton, by
deducting 50% to cover the costs of
recycling, violates N.J.A.C. § 10:49-14.5.
This Medicaid regulation provides: “A
provider shall not pay nor require payment
of an administrative charge or service fee
. . . for services for which reimbursement
is included as part of the Medicaid . . .
fee.” The District Court rejected Quinn’s
argument, noting that it “assumes that such
a restocking fee pays for a service ‘for
which reimbursement is included’ in other
Medicaid payments . . ..” Id.
Quinn argues that the capitation
payment Medicaid pays to Pompton for
medications dispensed to Medicaid
beneficiaries is understood to include the
costs associated with returns. N.J.A.C. §
10:51-2.7, titled “Prescription dispensing
fee (capitation)” provides, in relevant part:
(a) The New Jersey Medicaid and
NJ KidCare programs capitate the
dispensing fee for each prescription
for beneficiaries in Medicaid-
approved nursing facilities . . .
Additional dispensing fees (add-
ons) per prescription shall be given
to pharmacy providers who provide
the following levels of services:
1. Twenty-Four Hour Unit Dose
Service: Pharmacies . . . dispensing
medication in a dispensing system
in which a 24-hour supply of unit
dose oral medication . . . is
delivered for each beneficiary
daily, shall be reimbursed the cost
of all reimbursable medication plus
a fee of $0.656 per beneficiary day.
Edward Vaccaro, Assistant Director
of the Office of Health Service
Administration within DMAHS, explained
in his depositions that “[t]he capitation . .
. attempts to compensate the pharmacy for
different costs associated with delivery
systems, which is why the 24-hour unit
dose is the higher capitation . . ..” He also
stated that “[c]apitation is intended to
reimburse providers of long-term care
pharmacy services for the costs associated
with the dispensing of drugs . . . [and] [i]n
the case of long-term care, I would
consider recycling to be part of
dispensing.” Because only unit dose drugs
may be recycled, it may be fairly
understood by Vaccaro that the capitation
fee covers the costs of redispensing the
returned drugs. However, as Vaccaro
admitted, there is no regulation that
explicitly bars the collection of a
17 Edward Vaccaro, a New Jersey
Medicaid representative, stated during
his deposition that the regulations at
issue in this case require pharmacies to
provide credit for returned medications at
100%. Quinn asks us to accord this
statement deference as an agency
interpretation. However, the statement,
offered in a litigation setting, was not the
product of a rulemaking or an official
agency interpretation. Thus, regardless
of any deference that may be due a state
agency’s interpretation of its own
regulations, we are not persuaded that the
statement represents an official agency
position on this matter.

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18
restocking and redispensing fee.
Furthermore, § 10:51-2.7 does not indicate
that the cost of restocking and
redispensing returned medications is
included in the capitation payment.
Therefore, Pompton is not charging “an
administrative charge or service fee . . . for
services for which reimbursement is
included as part of the Medicaid . . . fee.”
N.J.A.C. § 10:49-14.5.
Finally, Quinn argues that Pompton
acknowledges an obligation to fully credit
Medicaid by submitting reimbursement
checks to Medicaid. Nevertheless, in
order for there to be liability under §
3 7 2 9 ( a ) ( 7 ) o f t h e F C A , a
misrepresentation must be made to
“conceal, avoid, or decrease an obligation
to pay or transmit money or property to the
Government.” 31 U.S.C. § 3729(a)(7).
Even if Pompton’s payments are implicit
representations that they are giving full
credit, without a clear obligation to credit
Medicaid, these representations are not
made to avoid or decrease a legal
obligation. As the District Court noted,
“[e]ven if the relevant regulations could be
construed to contain such an obligation,
the lack of clear legal authority might
preclude any finding that Defendants
breached the obligation with the requisite
level of knowledge.” Quinn, slip op. at 19,
n.16.
We conclude, therefore, that the
failure to credit 100% of the cost of the
medication is not a basis for FCA
liability.18
V. CONCLUSION
For the foregoing reasons, we will
affirm the District Court’s grant of
summary judgment against Thomas Quinn.
In doing so, we are constrained by the lack
of a regulation requiring that credit be
given for recycled medications. We
believe that Congress and/or the New
Jersey legislature might serve Medicaid
well if this lack of regulation were
corrected.
18 Quinn also appears to make a
worthless services claim in his reply
brief. He did not pursue, and the District
Court did not rule on, this claim below.
Therefore, we will not address it.

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