In a unanimous opinion issued on June 1, 2023, the Supreme Court of the United States clarified the relevant standard for scienter — or knowledge — in False Claims Act (“FCA”) actions by ruling that an objectively reasonable view that a defendant’s conduct was compliant with the law does not preclude the conclusion that the defendant “knowingly” violated the FCA in the face of evidence that the defendant subjectively believed that its conduct was illegal. In doing so, the Supreme Court vacated and remanded two consolidated cases to the United States Court of Appeals for the Seventh Circuit — U.S. ex rel. Schutte v. SuperValu Inc., No. 21-1326, and U.S. ex rel. Proctor v. Safeway, No. 22-111 — where the lower courts had concluded that so long as defendants’ conduct was consistent with an objectively reasonable interpretation of the relevant law, then defendants could not have “knowingly” submitted false claims, even if they never actually held the objectively reasonable interpretation.
The FCA imposes liability on anyone who “knowingly” submits a “false” claim to the government, and regulations promulgated by the Centers for Medicare and Medicaid Services (“CMS”) require pharmacies, including defendants in Schutte and Proctor, to report to their “usual and customary” prescription drug prices when submitting claims for reimbursement to the Medicare and Medicaid programs. Defendants were accused of violating the FCA by reporting their higher retail prices (rather than...
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