Supreme Court rules SuperValu, Safeway can face lawsuit over drug charges

The Supreme Court on Thursday ruled that a lawsuit filed by whistleblowers claiming SuperValu Inc. and Safeway Inc. overcharged Medicare and Medicaid for prescription drugs could move forward.

The Supreme Court ruled that any person who knowingly submits false claims to the government must be held liable for three times the government's damages, including penalties.

The court had to answer wether SuperValu and Safeway had the scienter or awareness required by the FCA if they correctly understand that standard and thought that their claims were inaccurate. We hold that the answer is yes: What matters for an FCA case is whether the defendant knew the claim was false. If responders correctly interpreted the relevant phrase and believed their claims were false, then they could have known their claims were false, the opinion said.

Justice Clarence Thomas, who authored the majority opinion, sent the matter back to the Seventh Circuit to proceed consistent with the high court's opinion.

The whistleblowers who filed the suit said grocery stores started selling generic drugs at reduced prices in order to compete with other retailers like Walmart. To get reimbursed by Medicare and Medicaid, pharmacies need to report typical and customary prices for the drugs to the government.

The whistleblowers contend that the lower prices were actually the company's usual and customary prices, and that instead of submitting those lower prices for reimbursement, the stores reported their higher, non-discounted prices.

The petitioners have made clear that Safeway charges just $10 for 94% of its cash sales over a 90-day supply of a cholesterol drug between 2008 and 2012, despite claims that the company did not charge any fees for it. In that period, Safeway also reported prices as high as $108 as 'usual and customary'. At least some times and for some drugs, SuperValu made more than 80% of its cash sales for prices less than what it disclosed as its usual and customary price, the opinion said. Of course, the phrase usual and customary on its face appears slightly open to interpretation. They contend that responders were informed their lower, discounted prices were their 'usual and customary' prices, believing their discounted prices were their usual and customary prices, and tried to hide their reduced prices from regulators and contractors.