On January 25, 2018, Associate Attorney General Rachel Brand issued a memorandum on behalf of the U.S. Department of Justice (DOJ) (the “Brand Memo”) which effectively limits the use and enforcement power of guidance documents for the purposes of affirmative civil enforcement cases, a development that could have a significant impact on how certain healthcare cases are handled at the federal level by federal departments, agencies, and administrations, including those that are fixtures of the healthcare marketplace – the Department of Health and Human Services (HHS) and its constituent agencies, including the Centers for Medicare and Medicaid Services (CMS), the Food and Drug Administration (FDA) and the HHS Office of Inspector General (OIG).
Federal agencies frequently publish guidance documents to provide details on how individuals and businesses of a particular industry should comply with federal law. Such guidance documents are especially relevant and important in the healthcare industry, whose players use such guidance documents published by agencies, including FDA, CMS and HHS, to better understand and ensure compliance with complicated statutes and regulations. For example, OIG regularly publishes guidance in the form of advisory opinions, special fraud alerts, and bulletins relating to the restrictions under the False Claims Act, and such guidance documents are in turn relied upon to support the government’s position to establish a violation of the False Claims Act or the federal Anti-Kickback Statute.
Through the limitations imposed by the Brand Memo, the DOJ is attempting to prohibit federal agencies from suggesting that their published guidance documents should be regarded as binding on the individuals and entities participating in the industries the agencies regulate. In particular, the Brand Memo prohibits federal government litigators from (i) using guidance documents to apply different (and what often are more draconian) restrictions than those included in federal rules and regulations – provisions that have the force and effect of law because they have been duly promulgated and issued by the Legislative Branch and the Executive Branch of the federal government; and (ii) using noncompliance with guidance documents as the exclusive evidence for establishing a violation of the applicable statute or regulation. Additionally, under the Brand Memo, evidence of noncompliance may only be used to establish the alleged wrongdoer had the requisite knowledge of the restrictions in the statute or regulation.
The Guidance Policy applies to all “affirmative civil enforcements” – civil lawsuits the DOJ files on behalf of the U.S. government to recover government money from alleged wrongdoers, and will apply to any forthcoming cases and cases pending as of the date of its issuance. Accordingly, the Brand Memo will not directly affect criminal proceedings, such as criminal actions brought under the Anti-Kickback Statute.
While it is difficult to predict whether the Brand Memo will indeed have a significant impact on federal healthcare investigations and prosecutions, it is clear that the new limitations give alleged wrongdoers a valuable defensive tool in such actions. Some commenters even suggest that the Brand Memo may discourage federal government litigators from bringing claims, such as claims under the False Claims Act, where a violation is not clearly apparent from reading the underlying healthcare statute or regulation. Additionally, given that the DOJ can no longer solely rely on guidance documents to establish a violation, the Brand Memo could have the effect of allowing alleged wrongdoers to make stronger arguments that a government action is meritless because of a lack of evidence that the violation actually occurred.
 This article is a companion to a Sheppard Mullin Government Contracts and Investigations Blog article dated January 30, 2018, entitled, “‘Brand Memo’ Prohibits US DOJ From Converting Agency Guidance into Binding Legal Obligations In Civil Enforcement Actions” by Emily Theriault, Esq. In this article, Ms. Theriault contends that the Brand Memo will likely impact government contract actions more broadly to include investigations and prosecutions in the defense industry and other significant economic sectors.