Opinion

Pharma company challenges the U.S. False Claims Act: what’s at stake for whistleblowers and government enforcement?

Pharma company challenges the U.S. False Claims Act: what’s at stake for whistleblowers and government enforcement?
Published Date
Jul 30 2025
A pharmaceutical company is currently appealing a record USD1.6 billion judgment in the US, arguing that a key part of the U.S. False Claims Act (FCA) is unconstitutional. This case, now before the Court of Appeals for the Third Circuit, could have far-reaching consequences for how fraud against the U.S. government is uncovered and prosecuted—especially by private individuals acting as whistleblowers.

What is the False Claims Act?

The FCA is a U.S. law dating back to 1863, designed to stop people and companies from defrauding the government. It makes it illegal to submit false or misleading claims for payment to government programmes, such as Medicare or Medicaid (the US equivalents of national health insurance schemes).

What makes the FCA unusual, and so powerful, is its “qui tam” provision. This allows private citizens, known as “relators”, to bring lawsuits on behalf of the government if they believe someone is cheating the system. The government may intervene as plaintiff and take over the action or, as occurs in many cases including the case on appeal, the government does not intervene, and the relator continues the litigation for the government’s benefit without the government’s input.  The government may also directly bring claims under the FCA. 

If a case is successful, relators often obtain a significant portion of the recovery for themselves. This financial incentive is a key driver behind many such claims.  

The constitutional challenge: who should enforce the law?

The pharmaceutical company’s appeal argues that letting private citizens act as government enforcers goes too far. It claims this violates the U.S. Constitution in two ways:

 

  • Appointments Clause: This part of the U.S. Constitution says only certain officials, appointed by the President or other government leaders, can exercise significant executive power. The company argues that private individuals are being given too much authority to act on the government’s behalf.
  • Separation of Powers: The U.S. system is built on the idea that government powers should be divided between different branches (executive, legislative, judicial). The company says the FCA’s qui tam provision blurs these lines by delegating core enforcement powers.
These arguments have gained traction recently. In 20231,  several U.S. Supreme Court Justices questioned whether the FCA’s approach gives too much power to private individuals. Since then, some federal judges have agreed, with one federal judge in Florida even ruling the qui tam provision unconstitutional.2  That decision is on appeal in the Eleventh Circuit. A March 2025 Fifth Circuit decision also questioned the constitutionality of the qui tam framework.3

 

These constitutional arguments relate to cases brought by whistleblowers where the government chooses not to intervene.

Why does this matter now?

The Trump Administration has strongly signaled its intent to use the FCA as a tool to enforce its “America First” policy agenda.  Recently, the Department of Justice (DOJ) and the Department of Health and Human Services (HHS) announced the formation of an FCA working group, signaling a strong coordinated approach to the FCA.  

In a press release discussing the new working group, HHS stated that the working group still “encourages whistleblowers to identify and report violations of the federal False Claims Act involving priority enforcement areas.” 

The DOJ also recently established the Civil Rights Fraud Initiative.  This initiative makes clear that the FCA may be implicated when a federal contractor or funds recipient engages in unlawful DEI programs.  Similarly to the FCA working group, the DOJ in its memorandum announcing the formation of this initiative “recogniz[ed] that it alone cannot identify every incident of civil rights fraud” and “strongly encourages” private parties pursuing claims for civil rights fraud under the FCA.  These actions by the Trump Administration build on a series of executive orders targeting related areas and promoting the Administration’s policy objectives.  

The growing surge in constitutional challenges presents a threat to the Administration’s use of the FCA as an enforcement tool, especially in light of its efforts to encourage whistleblowers to play an active part in its use to combat fraud in key issue areas.  Cases where the government does not intervene are more vulnerable to constitutional challenge.  But a whistleblower will not know necessarily whether the government will choose to intervene at the point when they decide to make a claim.  It would be a bit of a gamble.

What next?

If these constitutional challenges succeed, the U.S. Supreme Court may ultimately be called upon to decide whether private citizens can continue to act as whistleblowers under the FCA. 

A Supreme Court ruling striking down these provisions as unconstitutional would impact the level of the FCA’s power by stripping whistleblowing private citizens of their ability to independently pursue their claims on behalf of the government.  

Although the government can enforce the FCA directly, if these constitutional challenges succeed, they could fundamentally alter the balance of FCA enforcement and dramatically reduce the number of cases brought each year. 

Relevance for large businesses

The FCA’s whistleblower provision has long been a source of risk for businesses, as it empowers employees, competitors, or even third parties to bring claims that can lead to massive financial penalties and reputational damage. If the courts decide to limit or strike down the ability of private individuals to bring these cases, it could reduce the exposure of large companies to unexpected litigation and costly settlements. 

 

  1. United States ex rel. Polansky v. Executive Health Resources.  599 U.S. 419 (2023)
  2. U.S. ex rel. Zafirov v. Florida Medical Associates, LLC, 2024 WL 4349242 (M.D. Fla. Sept. 30, 2024)
  3. United States ex rel. Montcrief v. Peripheral Vascular Associate, 133 F.4th 395 (5th Cir. 2025)

 

 

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