June 2, 2023
Decided June 1, 2023
United States ex rel. Schutte v. SuperValu Inc., No. 21-1326; United States ex rel. Proctor v. Safeway, Inc., No. 22-111
On June 1, the Supreme Court held that an objectively reasonable interpretation of an ambiguous statutory or regulatory requirement does not preclude a finding that the defendant acted “knowingly” under the False Claims Act.
Background: Medicare and Medicaid rules often require pharmacies to disclose and charge the government for their “usual and customary” price for prescription drugs.
Two private relators sued, alleging that Safeway and SuperValu violated the FCA by reporting and charging their retail prices, rather than the prices they charged under certain discount programs, as their “usual and customary” prices to Medicare and Medicaid.
The district court agreed with the relators that the pharmacies’ “usual and customary” prices should have accounted for the discount prices, and that the pharmacies’ claims to the government accordingly were false—but granted summary judgment for the pharmacies on the ground that the pharmacies could not have acted with knowledge, as required by the FCA.
The Seventh Circuit affirmed, ruling as a matter of law that the pharmacies could not have acted “knowingly,” because interpreting the phrase “usual and customary” to refer to retail prices, rather than discount prices, was objectively reasonable—regardless of what the pharmacies themselves actually believed at the time...
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