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Pharma Company Brings Latest Constitutional Challenge To False Claims Act In Third Circuit
07/29/2025On April 29, 2025, a pharmaceutical company filed the latest constitutional challenge to the qui tam provision of the False Claims Act (“FCA”) when it appealed in the United States Court of Appeals for the Third Circuit a record-setting $1.6 billion judgment for allegedly defrauding Medicare, Medicaid, and the AIDS Drug Assistance Program by marketing HIV drugs for unapproved uses. Penelow, et al. v. Janssen Prods. LP, No. 12-cv-7758, 2025 WL 342079 (D.N.J. Jan. 30, 2025). This appeal, which argues that the FCA’s qui tam provision violates the Appointments Clause and the doctrine of separation of powers, joins similar legal challenges in the Eleventh Circuit and the Fifth Circuit and follows a 2023 Supreme Court dissent and concurrence in which several Justices signaled that the qui tam mechanism may empower private citizens to litigate on behalf of the United States in violation of the Appointments clause. Notably, these challenges arise at a time when the Trump Administration is actively seeking to leverage the FCA as an instrument to advance its policy objectives, particularly around healthcare and diversity, equity and inclusion initiatives, and the Department of Justice has thus far defended the constitutionality of the qui tam framework.
Enacted in 1863, the FCA proscribes individuals from defrauding the Government by making any type of “false claim.” 31 U.S.C. § 3729(a)(1)(A)-(G), (b)(2)(A)(ii), (b)(3). The FCA purports to allow not only the Government to bring actions, but also authorizes a private citizen, a “relator,” to file qui tam suits on behalf of the Government. 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.
In 2023, constitutional questions regarding the FCA’s qui tam framework gained renewed prominence following the Supreme Court case United States ex rel. Polansky v. Executive Health Resources. 599 U.S. 419 (2023). While Polansky addressed the Government’s broad authority to dismiss FCA qui tam suits, it triggered a reinvigorated discussion around the constitutionality of qui tam suits, the Appointments Clause, and separation of powers. Justices Kavanaugh, Thomas, and Barrett suggested that the qui tam provisions might violate Article II of the Constitution by conveying executive authority beyond the President. The Justices questioned Congress’s delegation of authority to private citizens to represent the United States in litigation, which set the stage for constitutional challenges to the qui tam framework.
Since Polansky, a growing number of federal judges have embraced the Justices’ logic in questioning the constitutionality of qui tam relators. In 2024, Judge Kathryn Kimball Mizelle in the Middle District of Florida, as discussed previously here, held that the qui tam provision was unconstitutional, concluding that it impermissibly delegates core executive authority to private individuals in violation of the Appointments Clause. U.S. Const. art. II, § 2, cl. 2. This case is currently on appeal in the Eleventh Circuit. In a March 2025 Fifth Circuit decision where the constitutionality of relators was not squarely before the court, Judge Stuart Kyle Durcan questioned the constitutionality of the qui tam framework in a concurring opinion. See United States ex rel. Montcrief v. Peripheral Vascular Associate, 133 F.4th 395 (5th Cir. 2025).
In the current appeal before the Third Circuit, the pharmaceutical company has embraced these constitutional arguments, writing in its opening brief that allowing private individuals to sue as relators grants “sweeping” and “unchecked” executive authority to private parties. Adopting the logic of three Justices and the decisions described above, the pharmaceutical company and supporting amici maintain that this delegation of core enforcement power violates the Constitution’s separation of powers and the Appointments Clause.
The constitutional challenges threaten to dismantle a significant portion of FCA cases at a time when a record number of qui tam actions are being filed. In fiscal year 2024 alone, relators brought an unprecedented 979 qui tam suits, while the Government initiated only 423 cases. This stark disparity underscores the central role that private citizen relators have recently played in both uncovering and prosecuting alleged fraud under the FCA. 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 these policy objectives.
This growing surge in constitutional challenges presents a significant 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. If courts continue to scrutinize—and potentially invalidate—the constitutionality of the FCA’s qui tam provisions, the issue is likely to reach the Supreme Court. 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. Further, if these constitutional challenges succeed, they could fundamentally alter the balance of FCA enforcement and dramatically reduce the number of cases brought each year. At a time when the Administration is relying on the FCA and encouraging whistleblowers to utilize its powers, the loss of these mechanisms would weaken the Government’s enforcement actions.
