2022 was an interesting year in False Claims Act (FCA) enforcement and case law developments – from uncertainty emanating from escalating circuit splits to low recoveries for the Department of Justice (DOJ). Looking ahead, 2022 may prove to be the calm before the storm.
With Supreme Court decisions due in two FCA cases this summer, the government litigating intervened cases involving complex FCA theories involving the Medicare Advantage program, FCA amendments pending again in Congress, and a likely backlog of pending settlements, 2023 already looks like a year to watch. Below are some predictions, expectations, and developments related to FCA enforcement that we will be closely watching in 2023.
On one level, we expect pandemic-related fraud to continue to be an enforcement focus in 2023. According to available sources, the government has determined that fraud on the pandemic relief programs was rampant. While many of the cases pursued to date tend to be smaller dollar cases, some involve high-profile actors – like a publicized investigation of a former National Football League (NFL) star pending in Mississippi – and the initiative DOJ launched to pursue them is honing the skills of DOJ’s trial attorneys, Assistant United States Attorneys (AUSAs), and data analysts across the country. Of course, these skills are transferable to other sectors of public spending. Significantly, DOJ’s COVID work reflects the Department’s increasing use of data analytics to generate leads that turn into investigations and, potentially, cases.1 Although this data mining (of sorts) is currently most widely used to spot fraudsters for investigation in criminal matters, we expect that experience will lead DOJ (and relators’ counsel) to argue that data analyses present evidence of schemes admissible in civil cases under the FCA.
In the health care space, as DOJ continues its focus on opioids and digital health, we also expect an increasing emphasis on rooting out potential fraud in clinical trials. Over the past few years, DOJ has been actively prosecuting researchers and research entities engaged in clinical trial fraud.2 Recent DOJ remarks make clear that we should expect such efforts to increase.3 Although it may be more challenging for DOJ to bring FCA actions in this space, we expect that any clinical trial conducted under a government grant or for which there is any federal program reimbursement – for example, if the subject product is already on the market – will be evaluated by DOJ though its perennial favorite lens, the FCA. Accordingly, it will be important for sponsors of such studies to maintain adequate controls and monitor those conducting the research.
We will be closely monitoring the case law developments discussed herein which have the potential to significantly shape FCA investigations and litigation. We will also be on the lookout for any case law expounding on the Supreme Court’s 2022 decision in Ruan v. US,4 in which the Court held that the government bears the burden of proving intent with respect to an affirmative defense under the Controlled Substances Act (CSA). Specifically, Ruan held that, in a criminal statute with exceptions that operate as affirmative defenses, the government, not the defendant, bears the burden of proving that the defendant understood its actions were outside the confines of the exception, and therefore unlawful. Justice Alito’s concurring opinion suggests Ruan may have implications beyond the CSA, potentially including prosecutions under the Anti-Kickback Statute (AKS). Since DOJ frequently enforces the AKS through use of the FCA, it follows that Ruan may impose a higher standard of proof in AKS-based FCA cases where the defendant claims the conduct at issue falls within a safe harbor. We will be watching closely to see if Ruan’s holding finds application in civil cases.
Finally, although our FCA analysis often focuses on DOJ’s efforts, one notable trend – and a safe prediction – is that there will be more declined qui tam litigation moving forward than ever before. The US$900 million Biogen settlement5 grabbed headlines last fall as the largest settlement ever in a declined qui tam. Would-be relators and their lawyers are more motivated than ever, and with DOJ’s decreasing desire to move to dismiss when it declines to intervene, we expect more and more private enforcement of the FCA in 2023 and beyond.
Staying on top of these and other potential developments in FCA enforcement will be critical for companies moving forward.
1 See, e.g., Department of Justice press release, “Justice Department Announces COVID-19 Fraud Strike Force Teams” (14 September 2022) available here.
2 See, e.g., Department of Justice press release, “Florida Co-Owner of Clinical Trial Pleads Guilty to Obstructing FDA Inspection” (12 January 2022) available here; see also Department of Justice press release, “Doctor, Clinic Owner and Staff Charged with Falsifying Clinical Trial Data (8 March 2021) available here.
3 See, e.g., Department of Justice press release, “Deputy Assistant Attorney General Arun G. Rao Delivers Remarks at the Food & Drug Law institute’s (FDLI) 2021 Enforcement, Litigation, and Compliance Conference (9 December 2021) available here.
4 Ruan v. U.S., 42 S. Ct. 2370 (2022).
5 Department of Justice press release, “Biogen Inc. Agrees to pay $900 Million to Settle Allegations Related to Improper Physician Payments (26 September 2022) available here.