Analysis of False Claims Act across the US Legal Market

The False Claims Act (FCA), with roots stretching far back to England's Middle Ages, was once a measure to stop unscrupulous vendors supplying rotten food, defective weapons, and sickly mules for the Union Army during the American Civil War. It is now considered the federal government's principal litigation tool in combating fraud against the government; wherever federal government money is involved, there may be a claim under the FCA resulting in large recoveries.

The FCA imposes liability on persons and companies who defraud governmental programs, and features a whistleblower provision that allows people who are not affiliated with the government, known as relators, to bring qui tam lawsuits on the governments behalf with the promise of a potential percentage of the governments recovery. Qui tam dates back to thirteenth century English law, from a Latin phrase meaning he who sues on our Lords behalf as well as his own. Effectively, the FCA encourages whistleblowing for a reward. If money is recovered for the government in a qui tam case, the relator is entitled to a share. If the government intervenes in a case, the FCA sets the whistleblowers share between 15-25%; if the government does not intervene, the share is up to 30% of the recovery. The relators share also depends upon factors such as the quality of the information, the assistance provided by the whistleblower, and the whistleblowers counsel.

The FCA and its whistleblowing capacities were largely ignored until the 1980s when increased military spending and reports of abuses by government contractors began to circulate. Amendments were made to the FCA in 1986, 2009 and 2010 to give it more strength and make it more attractive to whistleblowers. Fines were regularly increased against defendants, damages were tripled, and rewards for whistleblowers were added along with protections against retaliation.

Claims under the FCA have typically involved healthcare, military, governmental spending programs, and large pharma settlements. Cases against pharma companies are often related to off-label marketing of drugs by drug companies (which is illegal under the Federal Food, Drug, and Cosmetic Act), where off-label marketing leads to prescriptions being filled and billed to Medicare/Medicaid. It is expected that the health care industry will continue to receive close FCA scrutiny with a strong focus on telehealth services, Medicare advantage fraud, medically unnecessary procedures, and alleged kickbacks.

In 2020, the Department of Justice (DOJ) recovered $2.2 billion from FCA cases, with $1.6 billion of that total originating from cases filed under the law. Qui tam relators received a total of $309 million in rewards in 2020, and in 2021 the DOJ collected more than $5.6 billion in FCA-related recoveries. That figure was inflated by Purdue Pharma's $2.8 billion bankruptcy payment related to opioid marketing but even setting that aside, the government netted $2.8 billion from FCA defendants. This is in line with year-over-year trends for the last five years.

Forecasting suggests the total number of cases brought under the FCA will continue to climb. The DOJ has indicated a shift to bringing cases directly rather than relying on whistleblowers; a factor attributed to the governments increasing reliance on data analytics. The DOJ has referred to its sophisticated data analytics which allows it to identify patterns across different types of health care providers giving us a way to identify trends and extreme outliers.

The period between 2017-2020 was the most active period of enforcement in FCA history as measured by new matters opened, and arose from increased numbers of cases brought by the government rather than relators. In the first year of the Biden administration there were 203 government-brought cases which was more than a quarter of the total number of new matters bought in 2021.

Cybersecurity is an anticipated trend for FCA enforcement. The DOJ launched a new civil cyber fraud initiative that seeks to use the FCA to drive accountability by prosecuting cyber vulnerabilities and incidents that arise with government contracts and grants. Three common cybersecurity failures ripe for FCA scrutiny include knowing failures to comply with cybersecurity standards, knowing misrepresentations of security controls and practices, and knowing failures to timely report security breaches.

A further trend should see the FCA used as a tool to combat alleged pandemic fraud. The COVID-19 Fraud Enforcement Task Force was launched in May 2021 to highlight unlawful pandemic profiteering from the pandemic, such as issues relating to fake vaccines, counterfeit masks and other PPE, and the use of shell companies to receive assistance that might be unlawfully diverted.

This year, Chambers and Partners has rolled out a dedicated False Claims Act table, featuring 21 attorneys and 10 firms, including distinguished regulatory firms like Covington and Arnold & Porter and healthcare stalwarts like Ropes & Gray and McDermott Will & Emery. The full Chambers Rankings results will be released on June 1st. Chambers will also investigate plaintiff firms in the coming year with expertise in False Claims Act suits.