Last month, President Barack Obama signed the Fraud Enforcement Recovery Act ("FERA")
which substantially increased FCA enforcement resources and amended the statute (click here for White & Case's report on the FERA). The FCA prohibits individuals and companies from knowingly submitting or causing to submit a false or fraudulent claim to the government. The FCA also empowers private individual whistleblowers ("relators") to file qui tam suits in federal court on behalf of the government and to receive a share of any recovery. Such suits are filed under seal for sixty days to allow the government to decide whether to intervene. Even if the government does not intervene, the relator may continue to pursue the suit in the name of the government. Historically, nearly all of the money recovered in FCA cases result from suits in which the government intervenes.
Recent FCA developments include a Supreme Court decision which continues the Court's general approach of strictly construing the FCA and a decision by the government to intervene in a case which may be evidence of a more aggressive approach by the new administration.
The Supreme Court Resolves a Circuit Split Regarding Appellate Procedure in FCA Cases
In US ex rel. Eisenstein v. City of New York, the Supreme Court clarified the rights of qui tam relators in FCA cases by requiring them to file an appeal within thirty days of the entry of judgment in cases in which the government does not intervene. Under the Federal appellate rules, a private party has thirty days to appeal an entry of judgment, but the United States, if it is a party to the suit, has sixty days. In Eisenstein, the qui tam relator filed its appeal fifty-four days following the dismissal of its complaint and entry of judgment. The plaintiff argued that even though the government had declined to intervene in the suit, the sixty-day rule should apply because the government was a "real party in interest" with a right to a share of any damages. The plaintiffs also argued that since the suit was brought "in the name of the Government," the sixty-day rule should apply. Justice Thomas, writing for a unanimous Court, applied a strict reading of the statute and determined that the government is only a "party" if it either brought the suit or intervened.
The decision is another example of the Supreme Court applying a strict—and narrow—interpretation of statutory language in an FCA case. The Supreme Court would likely take a similar approach when interpreting newly amended provisions of the FCA that were added by the FERA. Additionally, the decision reinforces the fact that FCA defendants are in a much better position when the government does not intervene.
The United States Intervenes in Healthcare Case; Relator Brings Defense Industry FCA Case Alleging Over US$600 Million in Damages
In May, the United States, along with a number of states, intervened in an FCA suit against Wyeth based on claims that the company failed to provide the proper discounts to Medicaid for certain prescription drugs. Under Medicaid, drug manufacturers must charge the government the "best price" that it offers to other private healthcare providers. Wyeth allegedly overcharged Medicaid by reporting a "best price" for its acid suppressant drugs that was higher than the discount price private hospitals received through a bundled pricing arrangement. The plaintiffs allege that Wyeth's actions led to overpayments of hundreds of millions of dollars over the course of a decade.
In addition to the Wyeth suit, the new administration has now intervened in a number of FCA suits (including other cases in the healthcare industry). While it is still too soon to conclude that, as some have predicted, the new administration will be more aggressive in enforcing the FCA than the prior administration, there is some evidence already pointing in that direction and upcoming decisions to intervene bear close monitoring. As noted above, damages recovered in FCA suits generally occur in suits in which the government intervenes; in 2008, less than one percent of money recovered in FCA cases resulted from cases in which the government did not intervene.