False Claims Act Trends And Expectations For 2026

This is the sixth installment in our 2026 Year in Preview series examining important trends in white collar law and investigations in the coming year. We will be posting one additional installment in the series on international trade enforcement. Our previous post, Congressional Investigations: 2026 Year in Preview, can be found here.

The False Claims Act ("FCA") has long served as the federal government's workhorse for fraud investigations and enforcement. Perhaps more than any time in recent years, the executive branch writ large continues to signal that (1) it understands the potential breadth of the FCA as an investigations and enforcement tool for the government and whistleblowers, and (2) it plans to wield all available tools – including the FCA – to accomplish its stated priorities. Given the significant airtime expended nationally on the current administration's likely use of the FCA, whistleblowers and their attorneys have also signaled a strong desire to identify and pursue state and federal FCA litigation.

We anticipate a continued steady flow of health care and life sciences FCA investigations, as well as robust use of the FCA and its related investigatory tools (e.g., compulsory process) in: the trade, tariff, and customs space; in connection with investigations surrounding diversity, equity, and inclusion practices alleged to be discriminatory by the government or purported whistleblowers; and government contracting and cybersecurity. We also expect that State Attorneys General will continue and increase their use of state analogs to the federal FCA.

I. The Administration's Emphasis on the False Claims Act in Fraud Enforcement

From the outset, this administration has been vocal about its commitment to combatting fraud in government programs. Last year, the DOJ Criminal Division declared that "[r]ampant healthcare fraud and program and procurement fraud drain our country's limited resources." More recently, when announcing another record breaking year of FCA enforcement actions, Deputy Attorney General Todd Blanche stated that "[s]topping rampant fraud is a top priority, and . . . the False Claims Act remains one of the government's most powerful weapons against fraud."

Executive activity in 2025 aligned with that announced priority. In July 2025, the DOJ and the Department of Health and Human Services ("HHS") announced the renewal of the DOJ-HHS False Claims Act Working Group, which was initially formed in December 2020. The announcement identified six priority enforcement areas for the Working Group: (1) Medicare Advantage; (2) pricing of drugs, devices, and biologics; (3) barriers to patient care; (4) kickbacks tied to products paid for by federal health care programs, including drugs, medical devices, and durable medical equipment; (5) materially defective medical devices; and (6) manipulation of electronic systems containing health records.

In August 2025, the DOJ and the Department of Homeland Security ("DHS") launched another cross-agency group, the Trade Fraud Task Force, to pursue enforcement actions targeting tariff evasion. As described below, fraud related to trade, tariffs, and customs is an area of increased interest for the Trump administration, with some significant FCA recoveries announced over the last several months.

Further, as we detailed previously, the DOJ released updated guidance for its Corporate Whistleblower Awards Pilot Program, expanding the number of "subject areas" in which tips could lead to forfeiture. The expansion of this program creates a new reporting avenue for whistleblowers, on top of the frequently used qui tam provisions in the FCA and is yet another indicator that the government is encouraging potential whistleblowers to uncover fraud and rewarding those who do.

As we recently reported, on February 26, 2026, the Centers for Medicare and Medicaid Services ("CMS") announced a package of major anti-fraud actions, including a $259.5 million deferral of federal Medicaid funding to Minnesota, a nationwide six-month moratorium on new Durable Medical Equipment, Prosthetics, Equipment, and Supplies ("DMEPOS") supplier enrollment in Medicare, and a Request for Information soliciting stakeholder feedback on potential regulatory and programmatic changes that could be included in a future proposed rule titled "Comprehensive Regulations to Uncover Suspicious Healthcare," or the "CRUSH Rule." Together, these actions signal the administration's intent to significantly expand CMS's fraud prevention, detection, and enforcement capabilities across all major federal health care programs.

II. Priority Areas of FCA Enforcement

A. Trade, Tariff, and Customs Fraud

In the DOJ's May 2025 memorandum titled "Focus, Fairness, and Efficiency in the Fight Against White‑Collar Crime," the DOJ stated that it would prioritize enforcement of international trade, tariff, and customs fraud, which can give rise to liability under the reverse false claims provision of the False Claims Act that applies when an entity underreports or underpays amounts owed to the government.

On July 10, 2025, the DOJ combined resources from its Criminal and Civil Divisions to create a Market, Government, and Consumer Fraud Unit ("MGC Unit") within the Criminal Division's Fraud Section. The MGC Unit's stated goal is to "investigate[] and prosecute[] offenses involving fraud and manipulation that harm U.S. markets and investors, schemes to defraud government benefit programs, evade tariffs, and/or to procure government contracts through fraudulent means, and complex consumer and investment frauds targeted at Americans." Soon after, on August 29, 2025, the DOJ and DHS launched a cross-agency Trade Fraud Task Force to bring together prosecutors from the Civil and Criminal Divisions with investigators from U.S. Customs and Border Protection and Homeland Security Investigations. The Task Force's stated goal is to "aggressively pursue enforcement actions against any parties who seek to evade tariffs and other duties, as well as smugglers who seek to import prohibited goods into the American economy."

Around the same time, the DOJ began announcing a series of settlements of FCA claims grounded in customs evasion, all involving Chinese imports, signaling the DOJ's willingness to rely on whistleblowers in complex trade and shipment schemes:

• On July 23, 2025, the DOJ announced a $6.8 million settlement with subsidiaries of MGI International LLC for the failure to pay customs duties on certain types of plastic resin imported from China. The settlement amount was significantly lower than the maximum penalty available because the subsidiaries voluntarily self-disclosed the violations and cooperated with the government's investigation.
• On July 24, 2025, the DOJ announced a $4.9 million settlement with Grosfillex Inc. for evading antidumping and countervailing duties on certain aluminum products from China. The case originated from a whistleblower lawsuit brought in 2020 by a former employee; the whistleblower received nearly $1 million of the settlement.
• On December 18, 2025, the DOJ announced a $54.4 million settlement with Ceratizit USA LLC for failing to pay customs duties on tungsten carbide products from China, which has been touted as the largest FCA settlement involving customs fraud allegations. This FCA case was initially brought in 2022 by a whistleblower who received a payout of nearly $10 million.

All of these resolutions involved tariffs that have been in place for years and began with investigations or disclosures that predated this administration. Regardless, given the centrality of tariffs to President Trump's foreign policy agenda, we expect to see increasing enforcement in this space.

The U.S. Supreme Court's decision in Learning Resources, Inc. v. Trump, No. 24-1287 invalidated the set of tariffs imposed by the administration pursuant to the International Emergency Economic Powers Act, but there are many tariffs imposed under other authority and the administration is acting rapidly to impose additional sweeping tariffs, so this risk area is only growing. To avoid and limit potential liability, companies should continuously monitor tariff policies, regularly perform customs risk assessments, and tighten controls around valuation, tariff classification, and country-of-origin determinations, which are the core exposure areas.

B. Diversity, Equity, and Inclusion

President Trump's January 2025 Executive Order, titled "Ending Illegal Discrimination and Restoring Merit-Based Opportunity" ("DEI EO"), instructed "all executive departments and agencies (agencies) to terminate all discriminatory and illegal preferences, mandates, policies, programs, activities, guidance, regulations, enforcement actions, consent orders, and requirements."

Fairly promptly, agencies responded to the directive in the DEI EO. On April 3, 2025, the Department of Education delivered a letter ("April 3 Letter") to state and local education agencies, requiring each to certify that it will file assurances with the Secretary of State stating it "will comply with all Federal statutes regarding nondiscrimination." The assurances require that an agency does not "violat[e] Title VI – including the use of Diversity, Equity, & Inclusion ("DEI") [] to advantage one's race over another." In May 2025, the Office on Violence Against Women ("OVW") announced a list of "out-of-scope activities," which alert applicants to certain activities OVW cannot finance. Then, in June 2025, OVM began requiring all grant funding applicants to submit a letter certifying that grant funds would not be used for those out-of-scope activities. Many other agencies, like the Department of Housing and Urban Development, Department of Transportation, and the Federal Transit Administration announced grant conditions requiring compliance with the DEI EO.

Many quickly challenged the certification requirements imposed by the DEI EO and implementing agencies, generally bringing challenges under the Administrative Procedure Act ("APA"), the First Amendment, and the Fifth Amendment. Various district courts, in turn, have preliminarily enjoined these various certification requirements. For example, in American Federation of Teachers v. Department of Education, the U.S. District Court for the District of Maryland vacated the certification requirement imposed by the April 3 Letter, finding that the letter violated the APA because it constituted final agency action and violated the Fifth Amendment because it was vague and failed to define "certain DEI practices." No. 1:25-cv-628 (D. Md.). These injunctions were significant victories for federally funded programs.

However, on February 6, 2026, in National Association of Diversity Officers in Higher Education v. Trump, which involved, in part, a facial challenge to the certification requirement within the DEI EO itself, the Fourth Circuit vacated the preliminary injunction entered by the District of Maryland.

The Fourth Circuit did so on narrow grounds, holding that the plaintiff's facial challenge was unlikely to be successful because the certification in the DEI EO "requires only that plaintiffs certify compliance with federal antidiscrimination laws, which the First Amendment doesn't confer a right to violate." The Fourth Circuit left open further as-applied challenges "if the President, his subordinates, or another grantor misinterprets federal antidiscrimination law." We would expect to see both further agency action to enforce the DEI EO against federally funded entities and contractors and lawsuits challenging the constitutionality of any such action.

The federal government will continue to rely on Title VI and the Supreme Court's decision in Students for Fair Admissions, to prohibit purportedly unlawful DEI programs and activities while using the False Claims Act as a basis to enforce compliance. And in its related Civil Rights Fraud Initiative, the DOJ set out to investigate and, where appropriate, pursue FCA claims against recipients of federal funds that allegedly maintain prohibited race or sex based preferences in the wake of the DEI EO. In the memorandum announcing the initiative, Deputy Attorney General Todd Blanche stated that the FCA would be the "weapon" to go after corporations and schools that "continue to adhere to racist policies."

As recently as February 19, 2026, Brenna Jenny, Deputy Assistant Attorney General, Commercial Litigation Branch, United States Department of Justice, Civil Division, reaffirmed DOJ's plan to utilize all available tools, including the FCA, to target what the administration believes are discriminatory DEI programs. DAAG Jenny also explained that it is not the underlying DEI program that is the focus of the government's investigations; rather, the government will investigate allegedly unlawful discrimination, including in hiring and promotion decisions. The government appears to be reacting to the ongoing challenges to the DEI certification requirements and has signaled its intent to press forward, even if it requires a pivot in its own terminology and messaging.

C. Health Care

Health care continues to be the primary focus of FCA enforcement by the government and whistleblowers, as discussed in our recent post on Health care Fraud Enforcement in 2026. In the fiscal year ending in 2025, settlements and judgments under the FCA exceeded $6.8 billion, and over $5.7 billion of that sum related to health care matters, including allegations of fraud involving Medicare, Medicaid, and TRICARE. In addition, on February 25, 2026, CMS announced a major crackdown on health care fraud including "deferring $259.5 million of federal Medicaid funding in Minnesota," "a nationwide moratorium on Medicare enrollment for certain . . . suppliers," and "a call to action for Americans to support fraud prevention."

In 2025, the DOJ focused on three main areas of enforcement: managed care, prescription drugs, and medically unnecessary care. In the managed care space, CMS announced that it would expand its audit of Medicare Advantage plans to address what it estimates is billions of dollars in overbilling, and the DOJ intervened in an FCA suit alleging that major insurers paid hundreds of millions in kickbacks to steer beneficiaries into specific plans. On the prescription drug front, enforcement has targeted pharmacies, telehealth platforms, and pharmacy benefit managers, with courts affirming fraud allegations where prescriptions were signed off without legitimate doctor-patient relationships. Medical necessity continues to be a cornerstone of health care fraud enforcement. The DOJ secured a $45 million settlement with a wound care provider that allegedly billed Medicare for medically unnecessary surgeries and programmed its billing software to ensure the highest-reimbursed procedures were always billed.

As we have previewed, FCA issues in the health care space were actively litigated in trial and appellate courts in 2025. This included a significant defense win on scienter in Omni Healthcare, Inc. v. MD Spine Solutions LLC, No. 25-1110 (1st Cir.), in which the First Circuit affirmed the district court's grant of summary judgment in favor of the defendant and found that MD Labs did not submit false Medicare claims "knowingly" under the FCA. There, MD Labs relied on test requisition forms from clinicians at Omni Healthcare as evidence that the requested PCR urine tests were reasonable and necessary. The court credited this view, finding that a laboratory may rely on such physician orders as presumptively establishing medical necessity, which presumption must then be rebutted by the relator presenting evidence sufficient "to raise a genuine dispute of material fact as to the lab's scienter."

It was an active year for health care FCA trials. This included some significant liability determinations, including against long-term pharmacies and pharmacy benefits managers. See United States ex rel. Bassan v. Omnicare, Inc., No. 1:15-cv-04179 (S.D.N.Y.) (on appeal); United States ex rel. Behnke v. CVS Caremark Corp., No. 14-cv-824 (E.D. Pa.) (on appeal). There were also some defense wins, including in the government-intervened matter United States ex rel. Devarapally v. Ferncreek Cardiology, P.A., No. 5:17-cv-616-FL (E.D.N.C.), relating to alleged medically unnecessary cardiac procedures.

On damages, we saw some signals of restraint on outsized awards. In United States ex rel. Taylor v. Healthcare Associates of Texas, LLC, No. 3:19-cv-02486-N (N.D. Tex.), defendants successfully challenged a $450 million award as constitutionally excessive, holding that applying the FCA's per claim civil penalties would violate the Excessive Fines Clause of the Eighth Amendment given the gravity of the conduct and the disparity between minimum statutory penalties (nearly $300 million) and actual damages. The court instead opted to impose a reduced civil penalty equal to treble damages, resulting in a total judgment of around $16.5 million, plus post judgment interest.

And in what will be a key case to watch in 2026, United States ex rel. Penelow v. Janssen Products LP, an appeal is currently underway in the Third Circuit, as the defendant challenges a $1.6 billion verdict relating to allegedly false and misleading claims about the safety and efficacy of certain prescription drugs. Notably, the DOJ has filed a brief in that appeal arguing, in part, that off-label promotion does not alone establish FCA liability.

FCA claims in the health care industry show no signs of decline. As we previously observed, heightened focus on areas such as wound care reimbursement and Medicare Advantage will help health care remain the busiest area for FCA enforcement. DAAG Jenny recently outlined several areas of enforcement attention, including defective medical devices, skin substitutes, and network adequacy for managed care plans. DAAG Jenny also addressed FCA enforcement as the keynote speaker at the Federal Bar Association's Qui Tam conference, where she emphasized that health care has been a very active area for FCA enforcement, particularly regarding managed care, drug pricing, and unnecessary services. She also confirmed DOJ's continued reliance on data analysis to identify FCA enforcement targets, noting that if a company receives a Civil Investigative Demand, it is safe to assume that data analysis has occurred.

D. Private Equity and State AGs

States continue to maintain active state false claims enforcement dockets across a range of industries, with recent statutory amendments strengthening enforcement tools at the state level. For example, 2025 amendments to the Massachusetts False Claims Act under House Bill 5159 impose new disclosure obligations on private equity firms, real estate investment trusts, and management services organizations connected to health care portfolio companies. Under the expanded state law, entities with an "ownership or investment interest" – a term defined broadly to include direct or indirect equity stakes exceeding 10%, interests held by investor pools, or interests held by private limited partnerships employing investment strategies to earn returns – may now face liability for False Claims Act violations committed by their affiliated health care providers. The statute requires disclosure of any known violation within 60 days yet leaves undefined when an investor "knows about" or has "identified" such a violation. This creates substantial uncertainty for companies attempting to navigate internal investigations and meet compliance timelines, requiring accelerated engagement of counsel.

E. Government Contracting and Cybersecurity

The DOJ has intensified its use of the FCA to pursue government contractors and vendors for alleged cybersecurity misrepresentations and failures. The DOJ uses the FCA to enforce federal cybersecurity requirements across a wide array of matters, including cases involving failing to comply with required cybersecurity standards, misrepresenting cybersecurity controls and practices, failing to monitor cybersecurity systems, and failing to report cyber incidents and breaches in a timely manner.

In 2025, the DOJ announced a new record: nine cybersecurity-related FCA settlements (including one from late 2024), surpassing the total number of such settlements reached during the entire Biden administration. These settlements also illustrate the wide array of government contractors at risk of cybersecurity FCA enforcement, with defense contractors, universities and research institutions, health care services contractors, IT services companies, life sciences companies, and private equity firms among the settling parties. According to recent remarks by DAAG Jenny, whistleblowers have played a central role in cybersecurity FCA enforcement.

Five of the nine settlements were initiated by internal whistleblowers. Four of those settlements related to the failure to comply with cybersecurity agreements with the Department of Defense ("DoD"), and the other concerned genomic sequencing systems sold to the government, which contained cybersecurity vulnerabilities.

Given the DOJ's enforcement posture, organizations doing business with the federal government should prioritize rigorous cybersecurity compliance, accurate self-assessments, and working with legal counsel to provide prompt reporting of cyber incidents to mitigate FCA exposure.

III. Developments in the Courts

Zafirov and the Continued Challenge to the FCA's Constitutionality

At the tail end of 2025, the Eleventh Circuit heard oral argument in United States ex rel. Zafirov v. Florida Medical Associates LLC, No. 24-13581 (11th Cir.). The case is on appeal from the September 2024 district court ruling that the FCA's qui tam provisions are unconstitutional under Article II's Appointments Clause (previously covered here).

During oral argument, the panel seemed to view a qui tam relator's authority as "significant," noting that filing a suit on behalf of the United States and triggering a duty to investigate carries real weight. At the same time, the panel appeared less certain on whether a qui tam relator occupies a "continuing position," acknowledging that once the government declines intervention the case proceeds like any other private civil suit. This suggests that the outcome may hinge on how the panel resolves that second element.

It is also possible that the court's decision will narrow or sidestep aspects of the district court's ruling. The panel expressed interest, for instance, in broader Article II theories, such as the Vesting Clause or the Take Care Clause. The court also probed the DOJ on whether it had refined its position since the opening brief – now emphasizing the absence of a "continuing position" while softening its earlier submission that private citizens can never be "officers" for Article II purposes.

Until a decision is reached by the Eleventh Circuit, the U.S. District Court for the Middle District of Florida is alone in its holding. Every circuit court to consider the Appointments Clause issue has upheld the FCA's qui tam provisions, although the constitutional question is now on appeal before the Third and Sixth Circuits. Meanwhile, other district courts within the Eleventh Circuit have declined to follow Zafirov absent a circuit decision.

Government Interventions to Dismiss under 31 U.S.C. § 3730(c)(2)(A) Post-Polansky

In 2023, in the case United States ex rel. Polansky v. Executive Health Resources, Inc., the Supreme Court held that the government may intervene in a previously declined FCA case in order to dismiss it over a relator's objection.

Since then, the topic has been top-of-mind for FCA defendants in non-intervened cases. More recently, we have started to see some indicators that post-declination intervention in order to dismiss may be picking up steam. This includes recent comments from DAAG Jenny that DOJ will exercise its authority under 31 U.S.C. § 3730(c)(2)(A) in "appropriate cases." Identifying what constitutes an "appropriate case" is fact-specific, but the government has indicated that it would include cases where the government determines the relator's case lacks merit as well as cases involving previously disclosed or investigated conduct (perhaps a species of cases not dismissed under the existing public disclosure bar). DAAG Jenny stated that the government was responsible for 25 FCA dismissals under § 3730(c)(2)(A) in 2025 and noted that number does not reflect the full extent of the government's influence – namely, instances where a relator decides not to pursue a case after discussing it with the government.

Post-Polansky, we have seen only a few reported decisions concerning (c)(2)(A) dismissals, though those decisions are informative as to the factors militating in favor of dismissal. In United States ex rel. Vanderlan v. Jackson HMA, LLC, the U.S. District Court for the Southern District of Mississippi granted the government's motion to dismiss FCA counts under § 3730(c)(2)(A). Giving "substantial deference" to the government's arguments, the court emphasized that the claims "were never [the relator's]" and that the Executive retains broad discretion to end a suit that would not vindicate the government's interests, particularly where the relator presses a novel theory—here, that alleged "patient dumping" in violation of the Emergency Medical Treatment and Labor Act could support FCA liability via false certifications. The court also rejected the relator's demands for discovery or an evidentiary hearing as prerequisites to dismissal, reading § 3730(c)(2)(A) and Polansky to require notice, an opportunity to be heard, and a reasonable government explanation before granting dismissal – not a mini-trial.

In United States ex rel. Vermont National Telephone Co. v. Northstar Wireless LLC, a magistrate judge recommended dismissal under § 3730(c)(2)(A), stressing that the suit should vindicate the government's interests even if the relator presented a contrary assessment. The litigation stemmed from an FCC spectrum auction, in which certain bidding credits were available to small businesses. The relator alleged that competitors at the auction misrepresented their small-business eligibility in order to obtain bidding credits. The magistrate judge gave substantial deference to the government's "reasonable argument for why the burdens of continued litigation outweigh its benefits." Specifically, the government pointed to insufficient evidence of fraud, significant doubt about proving damages given that no credits were ever awarded, and significant resource burdens from discovery and privilege issues. Quoting Polansky, the magistrate judge explained that dismissal should be granted "in all but the most exceptional cases," which this was not. The district court has not yet adopted the recommendation of the magistrate judge.

That, in each case, the government's views on dismissal were afforded substantial deference is not surprising. We will continue to monitor the incidence of (c)(2)(A) dismissals as litigants – and the government's – comfort increases post-Polansky.

Scope of Government Funding under Wisconsin Bell

Entities participating in programs where even a slice of funding comes from the Treasury may find themselves within the FCA's reach. In Wisconsin Bell, Inc. v. United States ex rel. Heath, No. 23-1127, the Supreme Court held that E Rate reimbursement requests can qualify as FCA "claims" because, in the relevant years, the United States transferred more than $100 million from the Treasury into the Universal Service Fund, satisfying the statute's "any portion" government funding requirement. The Court emphasized that Treasury deposits – including delinquent contributions, interest, penalties, settlements, and restitution the government collected and routed through Treasury – constituted funds "provided" by the government for purposes of the FCA, even if the program otherwise relies heavily on private carrier contributions.

Concurring opinions flagged unresolved issues, including whether the FCA could reach purely private transfers compelled by federal regulation and potential Article II concerns with qui tam, leaving those questions for future cases.

Regeneron Pharmaceuticals, Inc. and But-For Causation

In United States v. Regeneron Pharmaceuticals, Inc., No. 23-2086 (1st Cir.), the First Circuit addressed the 2010 amendment to the Anti-Kickback Statute ("AKS") and held that a claim "resulting from" an AKS violation is false under the FCA only if the kickback was a but-for cause of the submitted claim. The court drew on ordinary causation principles and rejected the government's argument that mere exposure to an illegal remuneration suffices, distinguishing pre amendment or separate "false certification" pathways that may not require the same causation showing. The court stressed that the amendment operates on a separate track from false certification theories and does not include a materiality element, even as it requires actual causation.

The decision deepens a circuit split with the Third Circuit's more lenient "exposure" view and aligns with the Sixth and Eighth Circuits' stricter but for causation standard – positioning the issue for potential Supreme Court review. We will continue to follow the application of the Regeneron standard in other FCA cases.

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2025 saw significant FCA activity, including in evergreen enforcement areas like health care, and in areas of renewed priority, like tariff enforcement, and new applications in DEI. As evidenced, this administration has sounded its commitment to the FCA as a mechanism to combat fraud broadly, and we will be reviewing developments as they occur.

Law Clerk Zoe Sun contributed to this blog.

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