For the medtech industry, like some other health sectors, the persistent threat of serial and meritless False Claims Act (“FCA”) cases is, unfortunately, nothing new. Indeed, defending one’s company and reputation against such meritless relators-bar fueled FCA allegations can often be a multi-year, resource-intensive process—one that has a very real opportunity cost by diverting funds, energy, and time away from research and medical innovation, or bolstering patient access and improving health outcomes. As medtech innovation outpaces coding and payment systems designed for another era, this threat deters important advancement in technologies patients need.
“The Act raises legitimate concerns that we should all bear in mind…”
Fortunately for innovators, providers and patients, the Supreme Court in Universal Health Services, Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989 (2016), provided FCA defendants with an important shield from corrosive meritless claims. In clarifying that the FCA’s materiality standard is “rigorous” and “demanding,” the Supreme Court held, in relevant part, “if the government pays a particular claim in full despite its actual knowledge that certain requirements were violated, that is very strong evidence that those requirements are not material.” Put another way, in a unanimous opinion, the Supreme Court in Escobar indicated that the government’s decision to continue payment of a claim that it knew to be false weighs heavily against materiality. Now, recently proposed changes to the FCA threaten to throw this shield away.
However, in late July 2021, a bipartisan group of Senators introduced new legislation—the False Claims Act Amendments Act of 2021 (“Act”)—that, if enacted, would amend the FCA in significant ways, including the following:
- The Act seeks to roll back Escobar and make it harder for FCA defendants to defeat allegations of materiality.
- The Act seeks to restrict the Department of Justice’s authority to affirmatively dismiss FCA cases.
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