Slowdown Before the Lockdowns: FCA Recoveries Down Significantly Year Over Year in the First Half of Fiscal Year 2020
The first half of DOJ's 2020 fiscal year—running from October 2019 through March 2020—is complete, and it appears that the amount recovered from False Claims Act actions has fallen significantly from last year. Recoveries during the first half totaled just over $542.8 million, with $329.4 million collected in Q1 and $213.5 million collected in Q2. That amount is down considerably when compared to the same period in 2019, where DOJ recovered $1.32 billion. With government and industry now focused on the ongoing coronavirus crisis, recoveries for the rest of the year are likely to bear little resemblance to years past and thus tell us little about DOJ's long-term enforcement priorities. But even before we all started working from home, DOJ's numbers were way down.
Although the total dollars recovered by DOJ is down year over year, the difference does not appear to stem from a decrease in enforcement actions. The total number of judgments and settlements reported is actually up slightly, with 109 recoveries in the first half of FY 2020 compared to 102 in the same period in FY 2019. Rather, the difference appears to be driven by the amount recovered per action. Most significantly, FY 2020 has had a dearth of "blockbuster" recoveries. In the first half of FY 2020, DOJ announced just one recovery of more than $50 million—a $50.3 million settlement with a pharmaceutical company out of the Southern District of New York. During this same period last year, there were eight $50 million-plus recoveries, including one for $360 million, which together accounted for more than 63% of all dollars recovered in the first half of FY 2019.
As for where the enforcement action was, the industry breakdown remained largely the same. Recoveries from the healthcare industry accounted for the overwhelming percentage of dollars recovered. Q1 saw $290.6 million in recoveries across all healthcare categories, representing 88.2% of the quarter's recoveries, and Q2 saw $165.6 million in recoveries from the same categories, representing 77.6% of its recoveries. The remaining recoveries came from the defense industry, with a handful of other industries rounding out the total.
As is the norm, the vast majority of this period's recoveries were achieved by settlement (104 of 109). Relator-brought actions represented a slim majority of the number of total recoveries (55 of 109), but the vast majority of dollars recovered ($423.6 million of $542.8 million).
Looking to the second half of the fiscal year, it remains to be seen how exactly the numerous lockdowns and restrictions imposed due to the coronavirus will impede DOJ's enforcement efforts. Settlements already underway may well continue apace, but we would be surprised to see any significant number of new enforcement actions, at least in the immediate future. That said, as we have previously written, we are sure to see a rash of qui tam cases related to the crisis for years to come. Stay tuned to Qui Notes as we track the FCA-related aspects of the crisis. And please stay safe.
© Arnold & Porter Kaye Scholer LLP 2020 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.