DOJ Signals Continued Robust Enforcement of the False Claims Act In the New Administration

This year, at the Federal Bar Association’s (FBA) annual Qui Tam Conference, United States Department of Justice (DOJ) leadership confirmed that DOJ will remain committed to aggressive enforcement of the False Claims Act (FCA). The FCA has long been used by DOJ and whistleblowers as a tool to root out fraud in government programs.   DOJ leadership confirmed that FCA enforcement will be focused in four areas: healthcare fraud including Medicare Advantage (Part C), cybersecurity, pandemic relief fraud, and tariffs and customs avoidance. It is also noteworthy that DOJ leadership confirmed that DOJ would continue to defend the constitutionality of the FCA’s qui tam provisions before the Eleventh Circuit.

Key takeaways

• Confirmed commitment to robust enforcement of FCA.
• Continued prioritization of healthcare fraud.  DOJ signaled it will continue to concentrate on Medicare Part C fraud cases, with a focus on improper coding and potential violations of the Anti-Kickback Statute (AKS).
• Increased focus on cybersecurity enforcement and data breach reporting.
• Ongoing policing of pandemic relief fraud.  DOJ has more than 700 cases involving fraud on COVID-19 pandemic-era programs such as the Paycheck Protection Program (PPP).
• Enforcement of tariff and customs avoidance. As part of the administration’s focus on tariffs, DOJ announced that enforcement against illegal foreign trade practices would be a priority going forward.
• No change in defense of constitutionality of FCA’s qui tam provisions. DOJ also confirmed that it would continue to defend the constitutionality of the whistleblower provisions at the heart of the appeal before the Eleventh Circuit in Zafirov ex rel. United States v. Florida Medical Associates, LLC.

Deputy Assistant Attorney General (DAAG) Michael Granston and Director Jamie Ann Yavelberg of the Civil Division’s Commercial Litigation Branch confirmed at the FBA Qui Tam Conference that DOJ would continue aggressive enforcement of the FCA. DOJ recently announced that, in Fiscal Year (FY) 2024, FCA settlements and judgments exceeded $2.9 billion and that it recorded the second-highest total number of FCA settlements and judgments in history—558—second only to the previous year’s record of 566 recoveries.  DOJ also reported the highest number of qui tam complaints ever filed in a single year (979)—an average of 18 new cases filed each week, which is a 38% increase from the prior year’s total. In fact, of the $2.9 billion recovered by the government this past fiscal year, $2.4 billion arose from qui tam complaints.

Healthcare Fraud

Unsurprisingly, DOJ leadership highlighted healthcare fraud as a priority. This lucrative area of enforcement has long been a mainstay of DOJ activity. In our recent client alert, we noted that in 2024, federal actions for healthcare fraud under the FCA alone resulted in $1.67 billion in settlements and judgments from managed care providers, hospitals and other medical facilities, pharmacies, pharmaceutical companies, laboratories, and physicians.  Last year, DOJ entered into a $425 million settlement with a generic drug manufacturer and pursued claims related to the opioid crisis, securing an agreement for a general unsecured claim of $475.6 million related to aggressive marketing of an opioid drug to high-volume opioid prescribers.

At the conference, DOJ leadership identified several areas that would be targeted for enforcement, including upcoding and addition of diagnoses codes under Medicare Part C and violations of the AKS in the form of fees paid to providers and third-party actors such as insurance brokers to improperly steer beneficiaries to managed care plans.  

There was also discussion of the First Circuit’s recent decision adopting the “but-for” standard of causation in FCA kickback cases. The court held that, when the government alleges that a claim for federal reimbursement is false or fraudulent in violation of the FCA because the claim resulted from a kickback prohibited by the AKS, the government must prove that the kickback was the “but-for cause” of the claim. The First Circuit joins the Sixth and Eighth Circuits in adopting the “but-for” standard of causation, for now leaving the Third Circuit as the only circuit to adopt the looser standard advocated by the government and requiring only “some connection” between a kickback and a claim submitted for reimbursement to a federal healthcare program.

Finally, DOJ highlighted recent settlements involving pharmaceutical manufacturers and genetic testing labs. This is an area that we wrote about recently and continue to follow closely. Genetic testing programs have been scrutinized as DOJ and the Department of Health & Human Services, Office of Inspector General (HHS-OIG) are homing in on AKS liability inherent in this model. As the industry grows, government intervention is sure to follow.  Since 2022, there have been several enforcement actions in this space. Most recently, in November 2024, QOL Medical, LLC (QOL) and its CEO agreed to pay $47 million to resolve allegations that they provided free Carbon-13 breath-testing services in order to induce claims for the company’s therapy for a rare genetic condition.

Cybersecurity Fraud

Cybersecurity obligations are now baked into most federal contacts, and DOJ has invested heavily in policing those requirements – often by prosecuting entities that have been victimized by hackers. Since its creation in 2021, the DOJ Civil Cyber-Fraud initiative has used the FCA to prosecute government vendors and contractors who the government claims knowingly: (1) provide deficient cybersecurity products or services; (2) misrepresent their cybersecurity practices or protocols; or (3) fail to monitor and report cybersecurity incidents or breaches.  During the FBA Conference, DOJ specifically discussed the final Cybersecurity Maturity Model Certification (CMMC) rule issued by the Department of Defense in October 2024 and its implications for FCA investigations and whistleblower complaints. As long as large and high-profile data breaches continue, expect DOJ to follow on with cybersecurity investigations and prosecutions.

Pandemic Fraud

Recoveries for pandemic fraud such as improper payments under the PPP and fraudulent COVID-19 tests and treatment skyrocketed to $250 million in FY 2024, easily eclipsing the $48.3 million total that DOJ reported for FY 2023.  During the FBA Conference, DOJ leadership confirmed that pandemic fraud will continue to be a priority, and they expect these cases to continue to be “high-dollar” and more complex. Early on, DOJ invested in data analytics to investigate anomalies in the distribution of pandemic relief funds. Interestingly, DOJ speakers noted that baseline conclusions developed through data, without any whistleblower information or context, had limited utility in initiating new enforcement actions.

Tariffs and Customs Avoidance

DOJ leadership also predicted more enforcement of customs and tariff avoidance, given the importance of the issue to the Trump administration. Increased resources will be allocated to this area, and we will monitor it closely to discern what types of activity draw government attention.  DOJ has used the FCA to pursue these types of cases in the past. For example, in 2023, DOJ announced a settlement with a vitamin importer for underpaying customs duties owed on products imported into the United States.

Constitutionality of FCA’s Qui Tam Provisions

We have closely followed the district court’s decision in Zafirov ex rel. United States v. Florida Medical Associates, LLC, holding that the FCA’s qui tam procedures violate Article II’s Appointments Clause by permitting “unaccountable, unsworn, private actors to exercise core executive power with substantial consequences to members of the public.”  The last administration appealed the decision to the Eleventh Circuit, arguing that FCA qui tam relators are pursuing private interests and thus “not enforcing federal law in a manner inconsistent with [Article II].”  We’ve been monitoring the matter to see whether the new administration will continue to advance this position. Based on Attorney General (AG) Pamela Bondi’s confirmation hearing and remarks by DOJ leadership at the Conference, it appears that DOJ will continue to defend the constitutionality of these whistleblower provisions. In her confirmation hearing, AG Bondi responded to questioning from Sen. Chuck Grassley, a prime architect of the modern FCA, with assurances that she understood the role the FCA plays in “bring[ing] money back to our country” and that she would “of course” defend the constitutionality of the FCA. At the Conference, DAAG Granston announced that DOJ has defended, and would continue to defend, the constitutionality of the FCA’s qui tam provisions before the Eleventh Circuit.

Best practices for FCA compliance

With DOJ committed to aggressive enforcement of the FCA, entities that do business with the government or otherwise submit claims for funding or reimbursement should pay special attention to how their compliance programs will be viewed by regulators and enforcers. We recommend the taking the following actions:

• Evaluate current compliance programs to ensure they meet expectations set by government regulators and enforcers.
• Consider investing in data analytics if appropriate for your company, especially if you operate in the healthcare arena. DAAG Granston emphasized DOJ’s ability to use data analytics to combat fraud. We have previously discussed that the Commercial Litigation Branch has an in-house data analytics team to specifically identify anomalies.
• Examine internal reporting systems to verify that they are easily accessible to employees and give whistleblowers every opportunity to disclose issues internally prior to reporting to DOJ.
• Confirm that your policies provide appropriate whistleblower protections and that anti-retaliation policies in effect are enforced.
• Ensure your company is equipped to swiftly identify, investigate, and address reports of misconduct.  DAAG Granston recommended getting ahead of government enforcement by disclosing evidence and promptly reporting key facts, issues, and data.  He also stressed the importance of ensuring compliance personnel have timely access to relevant data. Early action can allow a company to stay ahead of regulators and make important strategy decisions, including the delicate issue of self-disclosure.