The Department of Justice has confirmed a dramatic increase in the civil monetary penalty (CMP) amount the government can levy per-claim for violations of the False Claims Act. As reported by Law360, the DOJ confirmed yesterday that the penalties are set to nearly double.

On November 2, 2015, the President Obama signed into law the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the 2015 Act), which further amended the Federal Civil Penalties Inflation Adjustment Act of 1990. The 2015 Act updates the process by which federal agencies adjust applicable civil monetary penalties for inflation to retain the deterrent effect of those penalties. The 2015 Act requires that not later than July 1, 2016, and not later than January 15 of every year thereafter, the head of each agency must, by regulation published in the Federal Register, adjust each CMP within its jurisdiction by the inflation adjustment described in the 2015 Act.

According to reporting by Law360, the issue has been on the radar since May when the Railroad Retirement Board updated FCA penalties in accordance with the 2015 Act. Since that early May publishing in the Federal Register, a multitude of federal agencies have followed suit and include, among others, the Department of Defense, Small Business Administration, Veteran’s Affairs, HUD, Postal Service, Department of State, and Department of Commerce.

For violations of the False Claims Act, the interim final rule minimum per-claim CMP’s will increase to $10,781 from $5,500, and maximum per-claim CMPs will jump to $21,563 from $11,000. The increase takes effect August 1 and applies to violations after November 2, 2015. Agencies are required to make an initial “catch-up” adjustment for CMPs. Thereafter, agencies are required to make annual inflationary adjustments, starting January 15, 2017, and each year following, based on Office of Management and Budget guidance. Future adjustments are based upon a cost-of-living adjustment. The cost-of-living adjustment is the percentage (if any) for each CMP by which the Consumer Price Index (CPI) for the month of October preceding the date of the adjustment (January 15), exceeds the CPI for the month of October in the previous calendar year.

The 2015 Act gives the DOJ flexability under the spending law, to enact a smaller increase if the full amount would produce a negative economic impact however, the department has said without explanation that it “is not evoking that authority in this rule,” according to Law360.

False Claims Act litigation in healthcare and pharmacy often involves large numbers of claims, therefore, the impact this may have on pending and future enforcement actions is significant. A good number of enforcement actions are settled however, for those that elect to go to trial, the financial risk has doubled. Even though the cases are settled this exposes the clients to higher settlement values as well as higher verdicts – the settlement amounts demanded and expected by the government will increase as a result.

False claims also applies to national security and defense contracts, and government programs such as federally insured loans, highway funds, research grants, agricultural supports, school lunches and disaster assistance. The regulation passed yesterday impacts more than 50 other categories affecting many industry sectors that do business with the federal government. Each agency under the 2015 Act is charged with adjusting the CMPs for inflation for the regulatory provisions under their jurisdiction.