Court limits False Claims Act liability for whistleblowers

In a ruling that provided comfort to drug companies defending dissident former employees’ whistleblower suits, the US Supreme Court said in June that False Claims Act liability is limited to acts done with an intent that the government itself pay a false claim. 

The court held that the federal government’s position that defendants may be held liable under the act’s false statements and conspiracy sections upon proof that a private entity paid a claim using funds received from the government impermissibly deviated from the law’s language. 

Sidley Austin attorneys said this decision has implications for manufacturers and other companies subject to whistleblower suits because it “significantly narrows the scope of potential False Claims Act liability.”

In making its ruling, the Supreme Court rejected a Sixth Circuit Court of Appeals holding that defendants could be held liable for false statements made to private entities. Thus, drug companies would have been subject to False Claims Act claims on the theory that their promo activities were intended to cause pharmacists or physicians to dispense products for which claims were paid with federal funds by a Medicaid managed care or Medicare Part C organization.

The attorneys also say the ruling calls into doubt the federal government’s theory that off-label promotion by drug companies may give rise to False Claims Act liability. The government has argued that a “statement urging a physician to prescribe a drug for an unapproved, off-label use could…satisfy the false statement requirement” of the act.