Bad news for those who receive any federal funds, directly or indirectly: It’s been a busy first-half in the False Claims Act arena, and it’s expected to stay that way, thanks to a combination of changes in the law, massive government spending, increased fraud enforcement resources, state legislative and enforcement activities, and pipeline full of government investigations and pending qui tam actions.

That’s according to the Mid-Year False Claims Act Update by Gibson Dunn & Crutcher, which notes that FCA filings in the first quarter of 2010 beat the number of filings during the same quarter last year and matched the number of filings in the final quarter of 2009.

As previously reported, sweeping changes to the FCA since the start of 2009 have greatly expanded the law’s scope, making it easier for a broader pool of potential defendants to bring so-called qui tam whistleblower lawsuits.

The alert provides details on major FCA settlements and important judicial decisions from the first half, as well as recent legislative action, and government enforcement budgets and priorities.

For instance, in the first half of 2010, GDC notes that the Department of Justice settled civil FCA claims with several pharmaceutical manufacturers that allegedly marketed drugs for unapproved, “off-label” uses, paid kickbacks to doctors and pharmacies for recommending their drugs, and/or failed to comply with rebate obligations under Medicaid regulations; medical device manufacturers that allegedly paid kickbacks to healthcare providers for purchasing and using their devices; hospitals, nursing homes, dentist offices, and other healthcare providers that allegedly submitted false, fraudulent, or inflated claims to federal healthcare agencies, provided unneeded and sometimes unsolicited services to patients covered by Medicare and Medicaid, and/or paid kickbacks to doctors for recruiting Medicare and Medicaid patients, among others.

Not surprisingly, the alert notes that the healthcare industry continues to be the locus of the most frequent and most substantial FCA recoveries. Among the significant recoveries during the first half of this year: four separate DoJ settlements of FCA claims, all announced in a one-week span, by pharmaceutical manufacturers totaling more than $695 million.

Enforcement officials have also been making good on their promises to scrutinize government contractors, as evidenced by several settlements in connection with FCA claims, including an $87.5 million DoJ settlement in May by technology vendor EMC Corp., among others.

Federal courts were also active in the FCA arena during the first half of 2010, issuing some 200 decisions citing the False Claims Act, including a Supreme Court opinion on public disclosures, and lower court opinions looking at FCA issues, such as the application of FERA, FOIA public disclosures, pre-suit releases, the time to file a notice of appeal, and tolling the FCA’s statute of limitations.

“Creative theories of liability and judicial decisions interpreting the ever-changing statute have created an erratic and sometimes unpredictable litigation landscape, and we anticipate that new developments will continue to emerge in the coming months,” the GDC alert states.

Meanwhile, lawmakers also continue to focus on the FCA. Although the FCA has recently been amended twice (in March 2010 as part of the Patient Protection and Affordable Care Act and in May of 2009 as part of the Fraud Enforcement and Recovery Act) GDC notes that Congress is on the cusp of yet again revising the whistleblower protection provision of the FCA.

While FERA extended the scope of 31 U.S.C. § 3730(h) to cover contractors or agents engaging in protected activity, GDC notes the latest version of the Financial Reform Bill would broaden the scope of protected conduct to include not only “efforts to stop 1 or more violations” of the FCA, but also lawful actions taken “in furtherance of an action” under the FCA, according to the alert.

The bill, which is expected to be taken up shortly by the Senate, would also add a new provision to Section 3730(h) setting a uniform statute of limitations for retaliation actions at three years after the date when the retaliation occurred, according to the alert.

At least one Justice Department official has suggested in public remarks that changes may be coming to the Program Fraud Civil Remedies Act, known as the “mini FCA,” which allows certain government agencies to pursue false claims of up to $150,000 through administrative proceedings. According to the alert, Congress could raise that cap, providing greater incentives and opportunity for government investigators to use the PFCRA to administratively prosecute false claims.

States are also getting in on the FCA action. More than 30 states, the District of Columbia, and a few cities already have some version of a false claims act, and Gibson Dunn notes that more states are expected to follow suit in response to the Deficit Reduction Act of 2005, which provides a financial incentive for states to enact laws that penalize the submission of false claims to the state’s Medicaid program.

For full details, see the Mid-Year False Claims Act Update.