A few weeks ago, the U.S. Court of Appeals for the Fourth Circuit answered a critical inquiry in the False Claims Act (“FCA”) context: does a defendant violate the FCA when its reading of the regulation is objectionably reasonable and there is no government guidance discouraging or rejecting that interpretation? Answering in the negative in a 2-1 decision, the court affirmed the dismissal of the case and injected into FCA cases the requisite state of mind (i.e., scienter) for violating a regulation as set out in Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 127 S. Ct. 2201 (2007) by the U.S. Supreme Court. United States ex rel. Sheldon v. Allergan Sales, LLC, 24 F.4th 340, 347–48 (4th Cir. 2022). In doing so, the Fourth Circuit joined the ranks of five other circuit courts that had considered the issue. Disturbed by the exceedingly complex Medicaid rules at issue that were open to varying interpretations and the constitutional implications of “the veritable thicket of Medicaid regulations, “labyrinthine reporting requirements,” and “the most completely impenetrable texts within human experience,” the Fourth Circuit placed the onus on the government “to indicate a way through the maze.” Id. at 344, 350, 352 (internal quotations and citations omitted).
Factual Background
In August 2014, Troy Sheldon, a former sales manager at Forest Laboratories, LLC (“Forest”), filed a qui tam lawsuit, contending that Forest had violated the Medicaid Drug Rebate Statute. To ensure Medicaid...
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