False Claims Act and Implications from the Safeway/ SuperValue Case

The False Claims Act (FCA) is a law that can be used to combat fraud against government healthcare programs, such as Medicare and Medicaid. Its origins date back to the Civil War, created with the intent to prevent fraud by contractors who were overbilling or now delivering goods to troops. It has undergone congressional amendments since then, but at its core, The FCA prohibits individuals and companies from submitting false or fraudulent claims for payment to the government for healthcare services or products. The FCA is often used to prosecute cases involving healthcare fraud, such as billing for services or products that were not actually provided, submitting claims for medically unnecessary services or procedures, and providing kickbacks to healthcare providers in exchange for referrals. The law also prohibits false certifications of compliance with laws or regulations, and false statements or omissions made in order to obtain payment from the government.

One of the largest FCA cases before the Supreme Court revolves around whether major retail pharmacies overfilled Medicaid and Medicare by not disclosing what their customary prices were. The genesis of these allegations stems back to 2006, when Walmart began offering heavily discounted medication prices, often as little as $2-$5 for a 30-day supply. Wal-Mart’s competitors responded by offering similar deals, but they also billed Medicare and Medicaid up to ten times or more their usual and customary prices. The issue at hand is whether the pharmacy’s prices were considered “usual and customary”. Walmart stated that its prices were usual and customary while most of the other competitors did not.

Two of the biggest recent cases U.S. ex rel. Schutte v. SuperValue Inc and U.S ex rel. Proctor vs Safeway alleges that these pharmacies overbilled the government hundreds of millions of dollars by not adjusting their usual and customary charges when they offered deeply discounted medications. The 7th U.S. Circuit Court of Appeals ruled the companies had not knowingly made false claims given there was no clear guidance at the time. Whistleblowers appealed the decision to the Supreme Court.

The outcomes of this case will have huge repercussions on either side, as it could limit access to necessary medications to Americans if hospitals and insurance providers if the Supreme Court rules against the decision of the U.S. Court of Appeals. The “objectively reasonable” standard is an important protection for governments and contractors who would otherwise be subject to liability for complex regulation, and deterred from making attempts to improve care delivery and access.
On the other hand, the case could limit the government’s ability to deter fraud through The FCA, arguing that bad actors can always claim a “reasonable” or “objective” standard after the fact, to avoid any liability.

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