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Court may scrutinize whistle-blower suits

December 9, 2008
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WASHINGTON - The Supreme Court signaled interest in a case that might set new limits on whistle-blower lawsuits against drugmakers, biotechnology companies, and other businesses.

The court yesterday asked the Justice Department for advice on a suit alleging a North Carolina water district fraudulently sought federal money for storm cleanup. The suit, allowed by a federal appeals court, invokes the US False Claims Act, which lets whistle-blowers press fraud claims on behalf of the federal government and then share in any recovery.

The Pharmaceutical Research and Manufacturers of America and the Biotechnology Industry Organization said the lower court decision could cause lawsuits to skyrocket. Last year healthcare fraud cases filed under the law resulted in $1.1 billion in settlements and judgments, according to a brief filed by two industry trade groups.

The central question is whether a False Claims Act suit can go forward even though the central allegations have previously been made public in state documents. The law isn't clear on that, but it expressly bars suits when allegations have been publicized by the federal government.

BLOOMBERG

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