On June 30, 2016, the Department of Justice announced that it will double the per-violation civil penalties assessed under the False Claims Act (“FCA”), 31 U.S.C. § 3729. DOJ’s interim final rule will raise the minimum per-violation penalty from $5,500 to $10,781 and the maximum penalty from $11,000 to $21,563. 81 Fed. Reg. 42491 (June 30, 2016). The change becomes effective on August 1, 2016 and will apply only to claims filed after November 2, 2015.
While dramatic, the increase was a response to something much more gradual—inflationary changes. Section 701 of the Bipartisan Budget Act of 2015, Pub. L. 114-74 (Nov. 2, 2015), requires federal agencies to update the civil monetary penalties within their jurisdiction to account for inflation. Specifically, the “head of an agency” must adjust civil monetary penalties through an interim final rule no later than July 1, 2016 and have the adjustment take effect by August 1, 2016.
Each agency’s 2016 adjustment, referred to as a “catch-up,” has to reflect the difference between the Consumer Price Index (“CPI”) in October of the year in which the penalty was last adjusted and the CPI for October 2015. Since DOJ last adjusted the FCA’s civil monetary penalties in August 1996, the current change captures almost 20 years of inflation.
The increase will have far-reaching implications for companies accused of violating the FCA. Not only will the higher range increase a company’s overall financial exposure, but the mandatory nature of these penalties will significantly increase the risks associated with a negative verdict. In other words, even if a company can persuade the trier-of-fact that the actual loss was very low, it will still face a heavy penalty for the violation. At the same time these increased risks are incentivizing companies to settle, they are arming Government with a much better bargaining position. This increased leverage will likely lead to more expensive FCA settlements.
Companies whose business necessarily requires a high volume of claims, such as government contractors, health care providers or pharmaceutical manufacturers, should be especially cautious going forward. Since the harm from the increased penalty is compounded not by the gravity of the violation but by the quantity of violations, this change will disproportionately affect companies who send a significant number of claims to the federal government. In light of this increased risk, high-volume submitters should consider auditing their claim submission process for implied certification risks to avoid paying massive penalties for errors.
The interim final rule is subject to a period of public comment. All public comments are due on August 29, 2016.
 A violation of the FCA carries with it “a civil penalty of not less than $5,000 and not more than $10,000, as plus adjusted by the Federal Civil Penalties Inflation Adjustment Act of 1990 [.. . .] three times the amount of damages which the Government sustains because of the act of that person.” See 31 U.S.C. § 3729 (a). The Interim Rule does not affect the FCA’s treble damages provision.
 The Act also requires the agencies to make additional annual adjustments, starting January 15, 2017. These annual adjustments will reflect the October-to-October change in the CPI and, therefore, will be much smaller in magnitude than the current change.
 The effect of this provision may not be limited to federal actions. The Deficit Reduction Act of 2005 encourages states to vigorously pursue false or fraudulent Medicaid claims by allowing them to retain an additional 10% of the amount recovered pursuant to a state false claims act if the state law penalty “at least as effective” as the federal law. For states to continue receiving this 10%, they will likely need to adjust their penalties accordingly.
 See Spencer Churchill, Jennifer Semko, John Rowley, and Maurice Bellan, U.S. Supreme Court Clarifies Scope of False Claims Act Liability, Global Compliance News, (June 21, 2016), https://globalcompliancenews.com/supreme-court-clarifies-scope-false-claims-act-liability-20160621/.
 Since the per-violation penalty calculation is completely untethered from the magnitude question, the interim rule has the potential to be grossly disproportionate to the government loss. Accordingly, a company faced with a massive civil penalty due solely to the volume of improper submissions may have a claim for an as-applied Eighth Amendment violation