Life Science Compliance Update

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August 29, 2016

A Mixed Bag - Implied Certification in False Claim Act Cases after the Escobar Decision

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The United States Supreme Court, in recent decision in Universal Health Services, Inc. v. United States ex rel. Escobar (“Escobar”) reaffirmed that the government and realtors via qui tam suits can pursue False Claim Act (“FCA”) liability against life science and healthcare companies. In doing so, the Court recognized such claims can proceed on an implied false certification theory. The Court also added a requirement that such parties must also demonstrate any misrepresentations were “material” on statutory, regulatory, or contractual requirements that make such representations misleading on those goods and services. Given that this heightened materiality standard is new, and the Court has remanded some cases for application of such new standard, the impact of Escobar on FCA liability will require a wait and see approach.

The case of Universal Health Services, Inc. v. United States ex rel. Escobar (“Escobar”) has been closely followed and frequently discussed by the members of both the legal and compliance professions. Now that the U.S. Supreme Court has decided the case, it appears that neither side won a decisive victory. What this means for compliance professionals remains unclear, but for the legal profession, it portends further litigation to clarify the ruling.

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