June 22, 2023 - On June 1, the Supreme Court decided two consolidated cases raising critical questions about the scope of the False Claims Act (FCA) — United States et al. ex rel. Schutte et al. v. Supervalu Inc. et al. and United States, ex rel. Thomas Proctor v. Safeway, Inc.

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The FCA allows private-citizen whistleblowers — called relators in court — to file claims against individuals or entities alleging they have defrauded the government by submitting false claims. When such actions, known as qui tam suits, are successful, relators share in the government's recovery.

The cases underlying the Supreme Court's recent decision involved relators' claims that retail pharmacies overcharged the government for Medicare and Medicaid refunds by citing as their "usual and customary" prices for prescription drugs prices that did not account for discounts most customers received. In the decision under review, the 7th U.S. Circuit Court of Appeals found that the pharmacies had not acted with the requisite knowledge to incur FCA liability because the definition of "usual and customary" underlying their claims was objectively reasonable.

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Reversing the 7th Circuit, the Supreme Court unanimously held that an objectively reasonable interpretation of an ambiguous phrase like "usual and customary" does not preclude liability under the FCA if a defendant believes its interpretation is wrong and thus knows the claim being...

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