“The False Claims Act is intended to root out actual fraud against the federal government, not to police compliance with every regulatory requirement imposed on a government contractor. If noncompliance is not ‘material’ to the government’s decision to pay a claim, the plaintiffs’ bar should not be permitted to transform a minor breach of contract into a fraud claim.”
—Richard Samp, WLF Chief Counsel
(Washington, DC)—The Washington Legal Foundation late Friday urged the U.S. Supreme Court to review (and ultimately overturn) an appeals court decision that authorizes private individuals to sue a drug company for defrauding the federal government if drugs sold to the government were not manufactured in compliance with all applicable federal regulations—even if the drugs were approved as safe and effective by FDA and even if government officials continued purchasing the drugs after investigating the fraud allegations. In a brief filed in Gilead Sciences, Inc. v. U.S. ex rel. Campie, WLF argues that the appeals court’s decision conflicts with Supreme Court precedent and facilitates the filing of unwarranted fraud claims against government contractors.
The False Claims Act (FCA) includes a unique qui tam provision that authorizes an individual (known as a “relator”) to file suit in the name of the United States against government contractors he believes have defrauded the government. If the relator prevails, he is entitled to share in up to 30% of any recovery, plus attorney’s fees. The relator in this case, after being fired by a drug company, came to the federal government with allegations that the company was not complying with FDA drug-manufacturing regulations. Government officials investigated the allegations but took no action. Indeed, the drugs in question continue to be FDA-approved, and the Government continues to pay billions of dollars each year to purchase the drugs.
The appeals court nonetheless reinstated the relator’s FCA lawsuit, finding that he had adequately alleged that the drug company defrauded the Government by submitting claims for payment without informing the Government of its alleged regulatory violations. WLF argues that the relator has failed to demonstrate that the alleged false claims are “material”—i.e., that the Government would not have paid the claims had it been aware of the violations. WLF argues that the Government’s response after the relator submitted his allegations demonstrates that the Government did not believe that any regulatory infractions were material.
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