The U.S. Supreme Court will hear arguments on Tuesday in a case that could undermine one of the government's most powerful tools for fighting fraud in government contracts and programs.
The False Claims Act dates back to the Civil War, when it was enacted to combat rampant fraud by private contractors who were overbilling or simply not delivering goods to the troops. But the law over time was weakened by congressional amendments.
Then, in 1986, Congress toughened the law, and then toughened it again. The primary Senate sponsor was — and still is — Iowa Republican Charles Grassley.
"We wanted to anticipate and block every avenue that creative lawyers ... might use to allow a contractor to escape liability for overcharging," Grassley said in an interview with NPR.
He is alarmed by the case before the Supreme Court this week. At issue is whether hundreds of major retail pharmacies across the country knowingly overcharged Medicaid and Medicare by overstating what their usual and customary prices were. If they did, they would be liable for triple damages.
The case essentially began in 2006, when Walmart upended the retail pharmacy world by offering large numbers of frequently used drugs at very cheap prices — $4 for a 30-day supply — with automatic refills. That left the rest of the retail pharmacy industry desperately trying to figure out how to compete.
The pharmacies came up with various offers that matched Walmart's prices for cash customers, but...
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