April 18, 2023. The False Claims Act (FCA) is a federal law that imposes liability on businesses or individuals who submit false claims to the government for payment or reimbursement. The scienter or knowledge element of the FCA is a crucial component that helps to distinguish between fraudulent and innocent actions. On Tuesday, at attorney for a relator (or whistleblower) argued before the Supreme Court of the United States regarding the element of scienter as applied to two retailers allegedly overcharging Medicare and Medicaid for generic drugs.
Scienter under the FCA requires proof of the defendant’s knowledge that the claim was false or fraudulent before they can be held liable. In other words, the government must demonstrate that the defendant had actual knowledge of the falsity or acted with deliberate ignorance or reckless disregard, to paraphrase Justice Gorsuch. What constitutes scienter under the FCA has been established through decades of common law on fraud, Relator’s counsel asserted.
The FCA scienter requirement serves as a safeguard to protect innocent individuals or entities from unwarranted prosecution. It allows the court to distinguish between those who knowingly defraud the government and those who may be unknowingly submitting false claims. In the case at the Supreme Court, the justices examined whether someone suspected of “flouting compliance obligations,” and effectively flouting them, can still be considered to have acted in good faith. Regarding the nature of scienter under the FCA, Relator’s counsel said, “The False Claims Act is designed to create that economic incentive to actually follow the best interpretation” of a law or statute.
Tuesday’s argument before the Supreme Court encompassed a consolidation of two whistleblower qui tam cases. One case challenged the Seventh Circuit Court of Appeals’ affirmation of a ruling for Safeway in a False Claims Act case. A whistleblower had filed suit against Safeway, alleging that the grocery chain intentionally overcharged the government for prescription drugs covered by Medicare and Medicaid. In a similar case, two pharmacists blew the whistle on grocery store chain SuperValu’s practice of allegedly overcharging Medicare and Medicaid for prescription drugs.
The Supreme Court will release an opinion over the next several months. As Justice Alito said, “[W]e do take these cases to decide legal questions and not just to decide the particular case,” and the legal community handling False Claims Act cases will be paying close attention to the Supreme Court’s ruling in this case.
If you would like to report Medicare fraud, including Medicare Advantage fraud, you can contact attorneys at Tycko & Zavareei LLP. Eva Gunasekera and Renée Brooker are former officials of the United States Department of Justice and prosecuted whistleblower cases under the False Claims Act. Eva was the Senior Counsel for Health Care Fraud. Renée served as Assistant Director at the United States Department of Justice, the office that supervises False Claims Act cases in all 94 United States District Courts. Eva and Renée now represent whistleblowers. For a free consultation, you can contact Eva Gunasekera at [email protected] or contact Renée at [email protected] (tel.: 202-417-3664). Visit Tycko & Zavareei LLP’s website for whistleblowers to learn more at https://www.fraudfighters.net/.