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SCOTUS Declines to Revisit Third Circuit Decision Containing Expansive Construction of Public Disclosure Bar

On October 7, 2019, the Supreme Court (SCOTUS) denied certiorari in the matter of Pharmerica Corporation v. U.S. ex rel. Silver, leaving on the books the Third Circuit decision which held that the False Claims Act’s (FCA) public disclosure bar “is not implicated . . . where a relator’s non-public information permits an inference of fraud that could not have been supported by the public disclosures alone[.]” This holding arguably weakens the public disclosure bar, which “…generally disallows qui tam actions that rely on allegations that are, at least in substantial form, already known to the public,” by expanding those circumstances in which it would not apply.

The Omnicare court held that although many publicly available CMS and OIG guidance documents used in the nursing facility industry had generally recognized certain elements of the fraud alleged in the qui tam complaint, the available information “did not disclose the alleged true state of affairs” regarding PharMerica’s Anti-Kickback Statute violations, and stated that the relator’s “private knowledge…was the key to uncovering the fraud.” For this reason, the court held that the qui tam was not barred by the public disclosure bar.

In light of SCOTUS’ determination not to revisit the Omnicare case, both defendants and potential defendants of FCA actions in this Circuit must be prepared for an uptick in the number of denials by courts of motions to dismiss based on this otherwise standard and highly effective (when applicable) defense. Defending an FCA-based investigation or litigation requires competent healthcare counsel who remain abreast of the FCA’s fast-changing landscape. If you or your healthcare entity are dealing with an FCA-related investigation or litigation, contact Frier Levitt today.