On December 22, 2023, the NAM filed an amicus brief asking the 7th Circuit not to impose False Claims Act liability where a defendant subjectively believes that it is following a legal obligation based on an objectively reasonable interpretation of an ambiguous statutory, regulatory or contract provision. In this case, a drug manufacturer participated in the federal government’s Medicaid drug rebate program which requires manufacturers to pay a rebate back to the state and federal government for each drug sold to the program based on the Average Manufacturer's Price for the drug. The plaintiff-relator alleged that Lilly miscalculated the rebate it was required to provide under the program by miscalculating the AMP even though Lilly based its calculation on a reasonable interpretation of an ambiguous term and informed the government of its interpretation without the government taking any action. The relator obtained a verdict of over $61 million, which the district court subsequently trebled.
We joined other business groups in arguing that the plaintiff failed to satisfy the falsity and knowledge requirements necessary to impose False Claims Act liability. We explained that those requirements are not satisfied where, as here, a party’s legal obligations are unclear, and the party acts in accordance with its genuinely held reasonable interpretation. Expanding False Claims Act liability to situations like this would expose government contractors to protracted litigation and potential liability any time a relator comes up with an alternative interpretation to a manufacturer’s interpretation of an ambiguous legal obligation.