The U.S. Supreme Court agreed to consider a pair of whistleblower-initiated False Claims Act cases accusing two pharmacy operators of billing Medicare and Medicaid programs for prescription drugs at artificially high rates while charging non-governmentally insured customers lesser prices for those same drugs.
The whistleblower-plaintiffs (also known as relators) are seeking to reverse decisions by the U.S. Court of Appeals for the Seventh Circuit, which held that each company should not be held responsible for the fraud. The Seventh Circuit reasoned that the billing practices were supported by an "objectively reasonable" interpretation of the law that requires pharmacies to bill based on "usual and customary" prices that customers are actually charged. The plaintiffs argued, however, that both companies knowingly defrauded the Medicare and Medicaid programs, and made efforts to conceal pricing practices.
The Solicitor General of the United States joined the relators in asking the Supreme Court to take the cases up for review.
The Supreme Court is poised to decide a number of key issues involving the False Claims Act this term, but none may prove more noteworthy than the issues presented in these matters.
The False Claims Act has long sought to protect taxpayers from the harm caused by those seeking to "knowingly" defraud the government. For years, parties have sparred over whether or not conduct occurred with the requisite "knowledge" to trigger liability under FCA. Now, the Supreme Court appears poised to offer guidance on how courts are to assess the issue of knowledge in the context of FCA violations, with wide-ranging ramifications for all who seek government funds (i.e., banks, medical providers, pharmacies, defense contractors and other government contractors).
In light of longstanding disagreements on how to approach the problem in the circuit courts, expect the Supreme Court's decision to send ripples (if not waves) through compliance departments nationwide. My money is on a reversal.