The Federal False Claims Act (“FCA”) allows private parties to bring lawsuits in the name of the federal government against defendants who allegedly “knowingly” present a false claim to the government for payment. The question for courts has been what standard should be applied to evaluate a defendant’s “knowledge.” The US Supreme Court recently clarified that courts must examine a defendant’s subjective belief as of the time a claim is submitted.

Medicare and Medicaid offer prescription drug coverage to beneficiaries with payments that are typically capped at a pharmacy’s “usual and customary” rates. In a unanimous June decision, the Supreme Court reversed the Seventh Circuit and found the defendant pharmacies could have violated the FCA by submitting claims for reimbursement from Medicare and Medicaid for purportedly “usual and customary” retail pharmacy prices, which were higher than discounted prices actually charged to customers.[1]

There is a two-prong test to establish a violation of the FCA. The claims must be false, and the defendants must know the claims are false. “Knowledge” is defined as a defendant’s:

• Actual knowledge, or whether a defendant is aware of information;
• Deliberate indifference, or awareness of a substantial risk that statements are false and intentionally avoiding steps to confirm truth or falsity; or
• Recklessness that a claim is falsely submitted for reimbursement, or consciousness of a substantial and unjustifiable risk that claims are false...

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