On June 1, 2023, the U.S. Supreme Court decided U.S. ex rel. Schutte v. SuperValu, No. 21-1326, together with U.S. ex rel. Proctor v. Safeway, Inc, No. 22-111, vacating and remanding the decisions below and holding that the FCA’s scienter element refers to a defendant’s knowledge and subjective beliefs — not to what an objectively reasonable person may have known or believed.
The False Claims Act (FCA) imposes liability on anyone who “knowingly” submits a “false” claim to the government. 31 U.S.C. § 3729(a). Federal regulations promulgated by the Federal Centers for Medicare and Medicaid Services establish that, in certain circumstances, pharmacies are required to bill Medicare and Medicaid for their “usual and customary” drug prices charged to the public. The question before the Court was whether the defendant pharmacies could meet the FCA’s requirement of a “knowing” action if they correctly understood the “usual and customary” language and thought that their claims were inaccurate.
Petitioners argue that respondents (in No. 22-1326, a group of companies collectively called SuperValu and in No. 22-111, Safeway, Inc.) defrauded the Government and violated the FCA by overcharging Medicare and Medicaid programs for years when seeking reimbursement for prescription drugs that the programs covered at higher prices than the ones that respondents usually and customarily charged to the public. In response to respondents’ competition, they adopted discount pricing for their...
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