Welcome to Original Source: The Sidley Austin False Claims Act Blog

The False Claims Act (FCA) has long been a key enforcement tool for the federal government in matters involving government contracts or other expenditures of government funds. FCA enforcement has traditionally focused primarily on two industries receiving a substantial amount of government funds: healthcare and defense and other government contractors. Recently, however, FCA enforcement has expanded to other industries, including financial services. Through the False Claims Act Blog, lawyers in Sidley’s White Collar, Healthcare, FDA, Government Contracting, Financial Services, Appellate, and other practices will provide timely updates on new and interesting developments relating to FCA enforcement and litigation.

Seventh Circuit Affirms That Safeco “Objective Reasonableness” Standard Applies to FCA Claims; Finds It Was Objectively Reasonable for Defendants to Charge Government Retail Cash Prices Instead of Discount Program Prices

In a 2-1 decision, the Seventh Circuit joined the Third, Eighth, Ninth, and D.C. Circuits in holding that the standard for “reckless disregard” under the Fair Credit Reporting Act (“FCRA”) established by the Supreme Court in Safeco Insurance Company of America v. Burr, 551 U.S. 47 (2007) applies equally to the False Claims Act (“FCA”). Applying Safeco, the Seventh Circuit also held that it was objectively reasonable for Defendants, a group of retail pharmacies, to charge the Medicare Part D and Medicaid programs their retail cash prices as their “usual and customary” prices for drugs rather than prices offered through competitor price-match discount programs.

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FDA’s OPDP Studying Promotional Booths at Medical Conferences

FDA recently announced that the Office of Prescription Drug Promotion (“OPDP”) initiated a new study on pharmaceutical companies’ interactions with healthcare providers at promotional booths in medical conference exhibit halls.  The study is intended to yield insights to inform OPDP policy making and review of proposed promotional materials submitted by companies seeking advisory comments.  It may also generate insights that may be used by DOJ to pursue companies for potential instances of off-label promotion or making statements about safety or efficacy that could be characterized as false or misleading.

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DC Circuit Clarifies Standard For Determining When A Relator Is Entitled To Recover Under FCA’s “Alternate Remedy” Provision

In an interesting opinion interpreting the FCA’s alternate remedy provision, the D.C. Circuit recently held that a relator who filed a False Claims Act (FCA) case that was ultimately settled was not entitled to a share of the monetary relief that the government obtained through the settlement of a separate Food, Drug, and Cosmetic Act (FDCA) enforcement action against the defendant pharmaceutical manufacturer despite the fact that the enforcement action was based on similar underlying facts.  The court explained that whether a separate government action is an “alternative remedy” in which a relator may share turns not on the commonality of facts between the government’s action and the FCA action, but on the type of claim brought and whether that claim could have been brought by the relator under the FCA.

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Proposed FCA Amendments Blocked from Senate Infrastructure Bill

The recently proposed amendments to the False Claims Act have stalled out for now.  As discussed here and here, these bipartisan proposed amendments—led by Senator Grassley—would have made four changes to the FCA, and most notably, would have radically altered the burden of proof for establishing materiality.

But after making a sudden appearance on Friday in the Senate infrastructure bill, last night those amendments were excluded.  This means that the amendments’ proponents will need to consider other vehicles, particularly “must pass” bills such as the budget resolution.  The Senate is expected to consider amendments to the budget resolution later this week.

We will continue to monitor developments regarding this proposed legislation.

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Bipartisan Legislation Introduced To Overhaul FCA To Further Hamstring Defendants

A bipartisan group of senators, led by Senators Grassley (R-IA), Leahy (D-VT), Wicker (R-MI), Durbin (D-IL), and Kennedy (R-LA), has introduced the False Claims Amendments Act of 2021.  This legislation is worth watching not just because it would significantly amend the FCA, but because Senator Grassley has a successful track record of shepherding through to passage legislation reversing gains made by defendants in FCA cases.

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Government Narrowly Avoids Invalidation of All LCDs in the Ninth Circuit

A divided panel of the Ninth Circuit recently reversed a district court decision that held that local coverage determinations (“LCDs”) are valid only when issued through a 60-day notice-and-comment rulemaking process.  Agendia, Inc. v. Becerra, No. 19-56516 (9th Cir. July 16, 2021).  The impact of the district court’s ruling—and a spirited dissent from the Ninth Circuit majority opinion—would have been significant for healthcare enforcement actions, including under the False Claims Act.  LCDs have never gone through notice-and-comment rulemaking.  A decision that all LCDs are accordingly invalid would have undermined a number of False Claims Act cases premised on the use of LCDs to apply the “reasonable and necessary” standard for Medicare reimbursement.  The Ninth Circuit is the first court of appeals to weigh in on this issue, however, and others may yet reach a different conclusion.

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