DOJ Reaches Settlement with OraPharma, Inc., Pushing Novel AKS Theory

Earlier this month the U.S. Attorney’s Office for the District of Massachusetts announced a $100,000 FCA settlement resolving novel allegations that a pharmaceutical company violated the Anti-Kickback Statute (“AKS”), and thereby caused the submission of false claims, through incentive compensation payments to its employees for conduct outside the scope of the employee relationship.

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FY 2022 FCA Recovery Statistics Show Increase in DOJ and Whistleblower Actions, Which Continue to Target the Healthcare and Life Sciences Industries

On February 7, 2023, Principal Deputy Assistant Attorney General, Brian M. Boynton, announced that the Civil Division recovered over $2.2 billion in settlements and judgments under the False Claims Act (“FCA”) for fiscal year 2022.  Detailed statistics on FCA recoveries from 1986 through FY 2022 are available here.

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Court Rejects Application of the Public Disclosure Bar Due to DOJ’s Opposition

On January 24, 2023, the United States District Court for the Middle District of Florida denied a  motion to dismiss a qui tam suit premised on Anti-Kickback Statute (“AKS”) allegations, explaining that it could not dismiss the case because DOJ and several interested states had filed oppositions to application of the public disclosure bar.  See United States ex rel. Marcus v. BioTek Labs, LLC, No. 8:18-cv-2915 (M.D. Fla. Jan. 24, 2023).

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DOJ Announces Increases to FCA Penalties Due to Inflationary Adjustments

On January 30, 2023, the Department of Justice published new inflationary adjustments to the False Claims Act’s civil monetary penalties.  Under the Balanced Budget Act of 2015, inflationary adjustments are based on the Bureau of Labor Statistics’ Consumer Price Index and are required to occur annually by January 15.  However, this most recent increase takes effect only eight months after the last adjustment. Since December 2021, CMP inflationary increases have occurred more frequently than in years prior, as DOJ likely tries to capitalize on the rising inflation rates to secure higher penalties.  The revised penalties will be assessed for violations that occurred prior to the adjustment, but that are assessed after January 30, 2023.  As of January 30, 2023, the minimum False Claims Act penalty increased from $12,537 to $13,508 per claim.  The maximum penalty has increased from $25,076 to $27,018 per claim (see here).

Supreme Court Mulls Scope of DOJ Dismissal Authority

On December 6, 2022, the Supreme Court heard oral argument in United States ex rel. Polansky v. Executive Health Resources, which presents the question of whether the government has the authority to dismiss a qui tam suit after initially declining to intervene, and if so, what standard of review applies to the government’s motion to dismiss.  Overall, the lines of questioning suggest that the Court will conclude that the government may dismiss qui tam suits after initially declining to intervene.  However, there was no clear consensus around how to define a judicially enforceable standard for evaluating the government’s dismissal authority.

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In Fraudulent Inducement Qui Tam, DOJ Once Again Invokes Dismissal Authority

As discussed here and here, DOJ during the last administration reinvigorated the use of its statutory authority to move to dismiss qui tam cases over a relator’s objections.  But over the past two years, DOJ’s use of this authority has once again fallen off.  However, last week, DOJ moved to dismiss a qui tam suit in the District of Maryland alleging that the defendants knowingly presented flawed studies to the Department of Health and Human Services (HHS) to induce HHS to purchase defendants’ influenza treatment for the Strategic National Stockpile (SNS).  DOJ’s motion to dismiss serves as an important reminder of the potential benefits of strategically engaging with DOJ and HHS early in the life of a qui tam case about whether dismissal is warranted.

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Supreme Court Declines to Address Application of 9(b) to the FCA

Yesterday the Supreme Court denied cert in a trio of cases seeking clarification as to the pleading standard required in FCA cases under Rule 9(b).  The petitioners urged the Court to remedy what they characterized as a circuit split over how much detail whistleblowers and the government must supply about alleged false claims in order to survive a motion to dismiss.  As discussed further here, the Solicitor General opposed these cert petitions and argued that the circuits have “largely converged” in their application of Rule 9(b) to FCA complaints.

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Fourth Circuit En Banc Vacates Application of Safeco to FCA Cases

The Fourth Circuit, evenly divided while sitting en banc, recently unwound a panel decision finding that Safeco’s “reckless disregard” standard applies to the False Claims Act (“FCA”).

In January 2022, a panel of the Fourth Circuit held, joining every other circuit to have considered the issue, that when allegations of false claims are premised on violations of ambiguous laws or regulations, the defendant’s scienter is properly assessed using the standard for “reckless disregard” established by the Supreme Court in Safeco Insurance Company of America v. Burr, 551 U.S. 47 (2007).  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.  As discussed here, applying Safeco, the panel affirmed the district court’s dismissal of the case.

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