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January 28, 2022

28 January 2022

Fourth Circuit Applies Safeco to FCA Claims, Accuses CMS of “Maintaining Strategic Ambiguity” Around Medicaid Drug Rebate Program Requirements

In a recent 2-1 decision, the Fourth Circuit joined every other circuit to have considered the issue in applying Safeco’s “reckless disregard” standard to legally false FCA claims based on alleged violations of ambiguous laws and regulations.  Under Safeco, courts ask whether a defendant’s interpretation of the ambiguous law or regulation at issue was objectively reasonable and whether authoritative guidance might have warned the defendant away from that interpretation.  The Fourth Circuit found that the Safeco standard “duly ensures that defendants must be put on notice before facing liability for allegedly failing to comply with complex legal requirements.  Without such notice, defendants are not likely to receive due process.”

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