AHA, AHIP, AMA, PhRMA Alliance Urges SCOTUS to Uphold False Claims Ruling

Billions of dollars at stake as high court takes up central tenets of the FCA.

In a rare, if not unprecedented, display of unity, the nation's largest payer, provider, medical device, and drug lobbies are aligned and urging the U.S. Supreme Court to uphold an appeals court's rulings that critics argue will defang the whistleblower penalties in the False Claims Act.

The high court on April 18 will hear arguments in the combined appeals of United States v. Supervalu Inc. and v. Safeway Inc., the main arguments for which SCOTUSblog describes as "whether and when a defendant's contemporaneous subjective understanding or beliefs about the lawfulness of its conduct are relevant to whether it 'knowingly' violated the False Claims Act."

In both cases, the whistleblowers alleged that the retail chains knowingly overcharged Medicare and Medicaid for the cost of prescription drugs that they sold to customers at a discount.

In split rulings, the U.S. 7^th Circuit Court of Appeals in Chicago sided with retailers in both cases, noting that the "usual and customary price" definition in the law that was relied on by the plaintiffs was vague and subject to interpretation.

The high court's ruling is expected to have a profound effect on whistleblower suits. Violators could still be punished, but it could prove harder for prosecutors and whistleblowers to demonstrate that the defendants knowingly broke the law, and thus would be subject to triple damages lawyers' fees, and other court costs.

With billions of dollars at stake, heavy hitters on both sides of the case have taken notice and filed amicus briefs.

The American Hospital Association, America's Health Insurance Plans, the American Medical Association, PhRMA, the U.S. Chamber of Commerce, biotech companies, defense contractors and other business lobbies, are urging the high court to uphold the appeals court ruling.

The U.S. Department of Justice, the U.S. Solicitor General, the National Whistleblower Center, U.S. Sen. Chuck Grassley (R-IA), and Taxpayers Against Fraud Education Fund (TAFEF) are among the lobbies urging SCOTUS to overturn the appeals court ruling, which TAFEF says "would turn fraud enforcement into a multi-billion-dollar game of Whack-A-Mole."

"The FCA is the government's primary civil anti-fraud tool, and it has been wildly successful, with more than $72 billion recovered on behalf of taxpayers since the statute was revamped in 1986," TAFEF writes in its brief. "The Seventh Circuit's rule threatens this success by giving defendants with subjective knowledge of their own wrongdoing a get-out-of-liability-free card, which they or their lawyers can play at any time."

"If adopted by this court, the rule would not only rewrite the FCA's knowledge standard, but would also severely hamstring the United States' ability to protect taxpayer dollars from fraud."

AHIP / AHA Moment

In their joint amicus brief, AHIP and the AHA acknowledge their unusual alliance, noting that they "may not always share the same opinion on matters of litigation and policy, (but) we agree that the current regulatory landscape and construction of the False Claims Act creates an untenable situation for healthcare providers and health insurance providers."

"Medicare and Medicaid are vital public health programs that can operate only with the participation of private parties like our members," AHA/AHIP write, "but participation in these programs also entails navigating some of the most complex statutory, regulatory, and sub-regulatory requirements in existence."

Because of that AHA/AHIP write that the government's argument "causes us great concern."

"The government would impose criminal or civil FCA liability even though it admits that it cannot 'feasibly address in advance every potential ambiguity' in its thousands of statutes of regulations. The rule it proposes would create a Wild West of ramifications for any well-intentioned and legitimate hospital or insurance provider that seeks to serve Americans in partnership with the government," AHA/AHIP write.

"If the government's argument is accepted, our members will be forced to spend more on litigation and less on patient care," the amicus brief states.