New Tariffs Raise False Claims Act Risks for Healthcare Companies

President Trump’s “America First” trade policy has introduced sweeping new tariffs that are significantly impacting healthcare and life sciences companies with global supply chains. These changes are not only increasing costs for medical suppliers but creating heightened legal risks under the False Claims Act (FCA).

Healthcare organizations are already familiar with FCA scrutiny. Of the $2.9 billion in FCA settlements and judgments reported by the Department of Justice in fiscal year 2024, over $1.67 billion involved the healthcare industry, including hospitals, pharmaceutical companies, laboratories, and physicians.

While traditional tax matters are exempt from FCA liability, tariffs—essentially taxes on imported goods—don’t receive this exemption. Tariff evasion can trigger substantial “reverse false claims” liability, including treble damages and severe civil penalties that could devastate businesses.

The DOJ’s Criminal Division recently identified trade and customs fraud, including tariff evasion, as a high-priority enforcement area. The division has even expanded its corporate whistleblower awards program to incentivize individuals who provide information about trade, tariff, and customs fraud by corporations.

California, home to the busiest U.S. ports receiving Asian imports—Los Angeles, Long Beach, and Oakland—is likely to be a focal point for many of these enforcement actions. This creates particular concern for healthcare suppliers, especially importers of medical devices and pharmaceutical products.

Trade Policy in Flux

The administration’s trade policy has evolved rapidly since President Trump took office. Through a series of executive actions under the International Emergency Economic Powers Act, he imposed a universal 10% tariff on all countries, with higher rates for nations with significant trade deficits. While pharmaceutical products were initially exempted from the higher reciprocal tariffs (but not from the universal 10% tariff), the administration has signaled that pharma-specific tariffs are forthcoming.

China has been subject to particularly aggressive tariff treatment, with rates that reached 145% before being temporarily reduced to 30% following recent bilateral discussions. Canada and Mexico have also faced 25% tariffs on imports that don’t qualify for duty-free treatment under the U.S.-Mexico-Canada Trade Agreement.

These tariffs are being contested in court. Both the U.S. Court of International Trade and the U.S. District Court for the District of Columbia have ruled against certain presidential tariff orders, but the U.S. Court of Appeals for the Federal Circuit has temporarily stayed these rulings pending government appeals.

Healthcare Supply Chain Vulnerability

Healthcare and life sciences companies are particularly vulnerable to these tariff changes. Most hospital equipment, including ventilators, anesthesia machines, and imaging technology, is manufactured outside the U.S. Many hospitals rely entirely on foreign suppliers for routine items like surgical gloves, masks, gowns, and intravenous catheters.

Pharmaceuticals are similarly dependent on global supply chains, with a significant portion of active pharmaceutical ingredients (APIs) and finished medications manufactured abroad, especially in India, China, and Europe.

Despite advocacy from the American Hospital Association and others to permanently exempt medical devices, supplies, and pharmaceuticals from reciprocal tariffs, medical products currently remain subject to these duties. With pharmaceutical-specific tariffs on the horizon, healthcare supply chains face increasing cost pressures and compliance challenges.

False Claims Act Liability for Importers

U.S. importers must declare their goods’ country of origin, value, and applicable duties to Customs and Border Protection (CBP). Knowingly providing false information to CBP—or demonstrating “deliberate ignorance” or “reckless disregard” for the truth—can trigger FCA liability.

Recent enforcement actions highlight this risk. In January, the DOJ intervened in a qui tam action filed against Barco Uniforms, a California-based company that sells licensed uniforms to healthcare providers. The government alleges that Barco and its suppliers executed a years-long scheme to evade millions in customs duties on garments manufactured in China by falsifying declared values and submitting fabricated invoices.

Similarly, Danco Laboratories agreed to pay $765,000 to settle allegations that it failed to properly mark Chinese imports of the drug mifepristone, concealing its obligation to pay marking duties. Another California-based importer recently paid $8.1 million to resolve allegations of evading customs duties on Chinese imports.

Country-of-Origin Violations

Healthcare companies that supply government purchasers face additional FCA risks related to country-of-origin requirements. The Trade Agreements Act requires certain products sold to the U.S. government to be manufactured or “substantially transformed” in the U.S. or designated TAA-compliant countries.

Even major medical device companies have faced significant settlements for violating these requirements. Coloplast paid $14.5 million after self-disclosing that it reported incorrect countries of origin for medical products sold to the VA. Medtronic paid $4.41 million to resolve allegations that it misrepresented the origin of thousands of medical-surgical products sold to VA Medical Centers and Walter Reed Army Medical Center.

Given the administration’s emphasis on promoting domestic manufacturing through trade policy, companies should anticipate increased FCA actions based on country-of-origin violations.

Mitigating Compliance Risks

As tariff requirements continue to evolve, healthcare companies involved in international supply chains must adapt quickly. This includes not only importers of healthcare supplies but also hospitals and other organizations that purchase from potentially tariff-evading suppliers, who could find themselves implicated in conspiracy theories of FCA liability.

Companies should assess, track, and ensure compliance with updated tariff and customs rules, while maintaining comprehensive documentation of these efforts. Building a culture of compliance through training and prompt investigation of misconduct reports is essential to reducing exposure to qui tam whistleblower actions.

With the administration’s aggressive use of tariffs and DOJ’s continued reliance on the FCA, international market participants face unprecedented risks associated with customs law violations. Proactive compliance measures are no longer optional—they’re essential to avoiding costly investigations, settlements, and judgments.