Escobar and materiality

Throughout 2017, the lower courts built upon the standard for determining materiality under the False Claims Act (FCA) established by the U.S. Supreme Court in Universal Health Servs., Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016) (“Escobar”). In Escobar, decided in June 2016, the Court endorsed the “implied false certification” theory of liability under the FCA, premised on a “rigorous” and “demanding” element of “materiality.”  As expected, this decision triggered a spate of litigation over what “materiality” means, and how to apply this requirement.

By way of background, the Court held that the “implied false certification” theory has two elements:

  • “the claim does not merely request payment, but also makes specific representations about the goods or services provided,” and
  • the defendant’s “failure to disclose noncompliance with material statutory, regulatory, or contractual requirements makes those representations misleading half-truths.”

The Court described the materiality standard as centered on “the likely or actual behavior” of the agency that made the payment decision, not whether the agency had the legal authority to deny payment, as argued by the Department of Justice (DOJ) prior to the Court’s decision. To be material, the Court reasoned, the misrepresentation must go to the essence of the bargain, and noncompliance cannot be “minor or insubstantial.”  The Court noted that materiality can be determined based on a number of factors – none of which are dispositive – and held that a court’s decision, though fact-specific, still could lead to dismissal on a motion to dismiss or at summary judgment. Those looking for additional background on the Escobar decision should see our Health Care Enforcement Defense AdvisoryContinue Reading Health Care Enforcement Year in Review and 2018 Outlook: The False Claims Act’s Materiality Standard as Established by Escobar Continues to Evolve

Earlier this week we released a Health Care Enforcement Advisory about a recent decision from the U.S. Court of Appeals for the Fifth Circuit that may have a significant impact on the element of “materiality” in False Claims Act (FCA) cases.  A panel of judges on the Fifth Circuit overturned a district court decision after a jury found the defendant, Trinity Industries, Inc. (Trinity), liable under the FCA for changing its highway guardrail design without disclosing such changes to the Federal Highway Administration (“FHWA”).  The Fifth Circuit decided as a matter of law that the case lacked the element of “materiality” required in FCA cases. Continue Reading Fifth Circuit Limits FCA Liability Due to Lack of “Materiality” in Highway Guardrails Case

In this post, I will be focusing on the intersection of off-label communications with government enforcement of health care fraud through the False Claims Act. Over the past eight years, the U.S. Department of Justice (“DOJ”) has been particularly aggressive in using the False Claims Act to pursue recoveries from individuals, health care providers, and drug manufacturers that participate in federal health benefit programs. In fact, from 2009 to 2016, DOJ collected $19.3 billion from health care False Claims Act settlements and judgments, with $2.5 billion recovered in fiscal year 2016, alone. (More DOJ false claims statistics can be found here.) DOJ’s enforcement efforts are not solely targeted against garden variety billing fraud, but also involve claims arising from alleged violations of health care regulatory requirements. Among other things, the DOJ has been targeting claims for reimbursement for off-label uses of regulated products. DOJ’s aggressive policy of holding manufacturers accountable for off-label claims under the False Claims Act is entirely consistent with FDA’s stance on off-label communications as described in the January memo. However, recent court interpretations of off-label communications as protected First Amendment speech, as well as interpretations of the causality component of False Claims Act claims, have apparently caused DOJ to reconsider its strategy with respect to such cases. Continue Reading The Past, Present, and Future of Government Regulation of Off-Label Communications – Part 5

On May 17, 2017 the American Bar Association convened its 27th National Institute on Health Care Fraud.  I have attended many of the past annual meetings, and always enjoy the presentations and the opportunity to network with colleagues from all sides of the aisle.  And I always come away with a few nuggets to share with those who did not attend.

Here are my seven top takeaways from this year’s Institute. Continue Reading Seven Takeaways from the ABA National Institute On Health Care Fraud