Liability in False Claims Act (FCA) suits depends on whether a defendant subjectively believed its claims were false, not on whether it can offer an objectively reasonable basis for its claims, the U.S. Supreme Court has held in a unanimous decision authored by Justice Clarence Thomas. U.S. ex. rel. Schutte v. SuperValu Inc., No. 21-1326, together with U.S. ex rel. Proctor v. Safeway, Inc., No. 22-111 (June 1, 2023).

Following the Court’s decision, Medicare and Medicaid providers and other federal contractors should practice caution when submitting claims to the U.S. government. An FCA defendant’s subjective beliefs at the time claims were submitted may become subjected to intense scrutiny.

FCA

Under Medicare and Medicaid, reimbursement for certain prescription drugs is limited to the “usual and customary” price charged by the pharmacies submitting claims.

The FCA imposes liability on anyone who “knowingly” submits a “false” claim to the U.S. government, including fraudulent billing under Medicare or Medicaid. The two essential elements of an FCA violation are:

1. The falsity of the claim; and
2. The defendant’s scienter — or knowledge — of the claim’s falsity.

Background

Starting in 2006, SuperValu and Safeway began offering discounted prices for many drugs. The prices were applied to most sales paid in cash (not through insurance). However, the supermarkets reported their higher, non-discounted prices in their reimbursement claims to Medicare and Medicaid, even though they...

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