Worthless Services
A federal court in Eastern Pennsylvania just delivered an important reminder that to successfully litigate a worthless service case in certain jurisdictions, you need to prove the government received nothing for its money, not that one piece of the puzzle was missing along the way.
In U.S. ex rel. Ellis v. CVS Health Corp., 2026 WL 1791002 (E.D. Pa.), a former salesman for a cold chain packaging company, brought a qui tam action against a pharmaceutical chain and its subsidiaries, alleging that the defendants knowingly billed the government for temperature-sensitive biologic drugs that were rendered medically worthless by inadequate shipping methods in violation of the False Claims Act. Specifically, the relator alleged that shipping containers that the defendants used sometimes caused the drugs to “flash-freeze” in transit. The court granted the defendant’s motion for summary judgment, finding that no reasonable jury could conclude that the drugs were damaged by the defendants’ conduct.
The drug makers’ own testing showed the medications could withstand the cold temperatures they were shipped in for longer than any cold exposure that occurred during actual shipping. Id. at 4. The relator alleged that even if the drugs were still usable, they were economically worthless due to the risk created by shipping. However, the judge rejected that argument, explaining that if a drug works, paying for it isn’t fraud, regardless of how it got there. Id. at 7. Furthermore, the court concluded that despite the systematic risk of freezing, the defendants were not grossly negligent, as there was no evidence of actual harm to the drugs.
This is a good illustration for relators and their counsel alleging a worthless services theory of fraud. If the government pays for a service or product that provides zero value, that alone is fraud. Unlike other FCA theories, it does not require showing the defendant also violated a specific certification or regulatory requirement. Historically, courts have held the bar for “worthless” very high, clarifying that it is not enough for a defendant to provide a product that is lower quality, has a higher chance of complication, or costs less than what was paid; the product or service has to have failed, almost as if nothing was delivered at all. For example, nursing homes are nationally reported to be understaffed, disorganized, and unable to keep up with regulations. They, however, are often not held liable under the worthless services theory, with courts finding that even facilities with tangible and documented problems still delivered sufficient genuine care to residents for the services not to be legally worthless. Similarly, in the instant CVS case, the court found that because the drug worked despite being shipped imperfectly, it still held value.
The strength of the evidence differentiates strong and weak cases in the world of worthless services. Whistleblowers who succeed typically have concrete evidence that the product did not function, such as lab test results, equipment, or other evidence. Alternatively, those who struggle typically work with risky, careless, or poorly managed products and services, but cannot show that the services provided had no value at all.
If you are considering blowing the whistle on a healthcare or government contract, this case illustrates the high standard that courts generally apply in these cases: does the evidence indicate that the product or service genuinely failed to do its job, or does it show something was handled carelessly?
The first kind of cases can succeed under a worthless services theory, while the second kind, on its own, usually will not. However, it may still support a different type of fraud claim, which should be the first checkpoint of all whistleblower cases.
This piece was written by Ennyn Chiu, an intern with TAF Coalition.
