Seventh Circuit nixes pharmacist's fraud suit against former employer, revives wrongful termination claim

By Jonathan Bilyk | Dec 11, 2014


A federal appeals court has denied a fired Ukrainian pharmacist the chance to continue his pursuit of a bounty for exposing what he purported to be a kickback scheme by his former employer, a West Side pharmacy, to defraud Medicare and Medicaid and boost business by improperly waiving co-pays on prescriptions and providing gifts to customers.

Saying the pharmacist failed to provide the evidence needed to back his big claims, the Seventh Circuit Court of Appeals, however, said the pharmacist could revive his suit against the pharmacy for allegedly firing him in retaliation for expressing concerns over the potentially illegal activity.

In its Dec. 3 ruling, the federal appeals court rejected, in large part, an appeal by Yury Grenadyor, who had asked it overturn the district court’s dismissal of his claims against his former employer, Ukrainian Village Pharmacy Inc.

The panel's opinion was authored by Judge Richard A. Posner, with judges Ilana Diamond Rovner and John Daniel Tinder concurring.

U.S. District Judge Harry D. Leinenweber dismissed the case after determining that  Grenadyor, since 2009 and amid “four opportunities to plead his claims,” never could “describe adequately a fraudulent scheme involving defendants (Ukrainian Village Pharmacy.)”

Ukrainian Village Pharamacy operates a store in the 2300 block of West Chicago Avenue, near North Western Avenue, in the Ukrainian Village neighborhood on the city’s West Side. The store is owned, along with a number of other pharmacies serving Ukrainian American populations in other states, by a family identified in court documents as a “family named Bogacheck.”

Grenadyor alleged the pharmacy, under the influence of the owners, had sought to maintain its customers’ loyalty and profitability by essentially submitting fraudulent claims for reimbursement to Medicare and Medicaid.

Under the scheme outlined by Grenadyor, the pharmacy would allegedly allow customers to avoid paying co-pays required by the government health care payment agencies, while billing the government for the full amount, as if the co-pay had been paid.

For instance, in an example laid out in the panel's ruling, should Medicare allow the pharmacy to charge $10 for a particular drug, the pharmacy may be allowed to bill Medicare for $9, while charging the customer a $1 co-pay.

However, if the pharmacy waives the co-pay, under the government rules, they should only bill the government for $8. Should they still bill Medicare for $9, the decision to waive the co-pay would amount to a $1 kickback to the customer in exchange for their business and, thus, amount to fraud.

Grenadyor alleged the Ukrainian Village Pharmacy did just that, while also charging the government for prescription drugs never picked up by customers and routinely providing customers with gift bags of “caviar” and other Ukrainian and Russian ethnic items in exchange for their business.

That, too, could run afoul of the law, should the gifts exceed $50, the court noted.

Although Grenadyor's allegations were severe, both the federal and appellate court said he failed to support his claims with specific evidence.

The Seventh Circuit panel noted, for instance, that Grenadyor could not demonstrate the pharmacy ever knowingly and willfully violated the law, nor did he produce identified corroborating witnesses.

He also could not provide such specific details as the type of caviar in the gift bags – the judges noted caviar can come in numerous varieties at varying price points-- or the names of the customers who received “more than $50 worth of these goodies,” or “that those customers who did receive more were not Medicare or Medicaid recipients and so cost the government nothing.”

Further, the panel said they did not believe Grenadyor was ever in a position to learn the pertinent details of many of the activities he alleged were committed illegally by the pharmacy. For instance, the judges noted, Grenadyor could not explain how he knew  charges for prescriptions not picked up by customers were never reversed.

“These are all things that Grenadyor, if he isn’t fabricating the incident, would know without having to conduct discovery,” Posner wrote for the panel. “‘I know they were never reversed, but I don’t know how I know they were never reversed,’ is nonsense.”

The judges, however, said they believed Grenadyor may have more firm legal ground on which to stand to press his claim he was wrongfully terminated from his job after complaining about the perceived improper activity to his superiors at the pharmacy.

The panel's ruling reversed Leinenweber’s dismissal of that claim, and sent the matter back to the district court for further proceedings.

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