In January 2021, the U.S. Dept. of Justice (DOJ) announced $2.2 billion in False Claims Act (FCA) recoveries for fiscal year 2020, which ended on September 30.[1] Although this amount is substantial, it nonetheless represents the smallest recovery figure in 10 years.

These figures reflect the Trump administration’s unaggressive enforcement efforts and its restrictive view of the FCA. As recently as 2016, FCA recovery exceeded $4.5 billion. Recoveries in 2019 were $3.1 billion.

Several additional factors contributed to the decline in recoveries: (1) the impact of COVID-19 on investigations and (2) the complexities of settling large pharmaceutical cases within fiscal year 2020.

Once again, the healthcare industry was the major contributor to FCA recoveries, accounting for $1.8 billion, or almost 82%, of the total recoveries. Cases regarding kickbacks by medical equipment suppliers and medical laboratories were large contributors. During fiscal year 2020, the DOJ also resolved several non-healthcare procurement fraud cases, including cases regarding false claims for overcharges and false billings on a large U.S. Department of Energy project. The DOJ explained that recent large settlements from claims relating to litigation against the opioid manufacturer Purdue Pharma were not settled in fiscal 2020.

Despite the Trump administration’s shift in focus away from qui tam actions, those cases remained a driving force behind FCA litigation, accounting for almost 73% of recovered funds. The 672 qui tam cases filed, which is the highest number since 2017, underscore the critical importance that whistleblowers continue to play in FCA matters.

The years ahead will bring a significant increase in FCA investigations and settlements. The Biden administration will be more aggressive than the previous administration in FCA enforcement, and more receptive to working with relators. In addition, the dramatic $2 trillion increase in federal funds distributed to businesses and individuals through COVID-19 relief legislation will likely lead to more investigations, as the 2008 financial institution relief package did. Recent legislation, which includes changes to antitrust whistleblower laws, has signaled Congress’s intent to expand to other industries and strengthen whistleblower protections. Finally, it is anticipated that state attorneys general will likely increase enforcement of state actions that parallel FCA violations.

False Claims Act litigation is here to stay and will increase during the Biden administration. Companies need to review their compliance programs and procedures for investigating whistleblower allegations and ensure that persons reporting any complaints have safeguards against retaliation. The investment in these compliance programs is the best method to address the upcoming surge in federal investigations and litigation.

For more information about the False Claims Act, please contact Jonathan Feld (312-627-5680 or[email protected]), Jason Ross (214-462-6417 or[email protected]), Kevin Connor (312-627-8322 or[email protected]), or your Dykema relationship attorney.