On April 17, 2023, the U.S. Supreme Court heard oral argument in the consolidated cases of United States ex rel. Schutte v. SuperValu Inc. and United States ex rel. Proctor v. Safeway, Inc. The dispute concerns the relevance of an actor’s subjective knowledge under the False Claims Act (FCA) when the actor adopts an incorrect but nevertheless “objectively reasonable” interpretation of a statute or regulation.
The Court’s decision will have a significant impact on a number of industries and, in particular, companies in the healthcare space due to the complicated and often ambiguous nature of statutory and regulatory requirements under federal healthcare programs.
Petitioners — qui tam whistleblowers — allege respondents — nationwide grocery chains with retail drug pharmacies — knowingly submitted false claims to federal healthcare programs for prescription drugs. In particular, federal law requires pharmacies to report to the government the “usual and customary” prices of their drugs, and petitioners allege respondents violated this requirement by reporting their retail cash prices for prescriptions rather than lower, price-matched amounts charged to qualifying customers under discount programs. Petitioners argue respondents therefore knowingly submitted false claims and overcharged the government by using the higher retail cash price.
The Seventh Circuit’s Adoption of the Safeco Objective Knowledge Standard
In both Schutte and Proctor, split panels of the U.S. Court of...
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