In a closely watched appeal, the U.S. Court of Appeals for the First Circuit ruled on February 18 that to satisfy the causation requirement in False Claims Act (FCA) actions based on alleged Anti-Kickback Statute (AKS) violations, the government or relator must prove that the alleged kickbacks were the “but-for” cause of the defendant’s allegedly false claims. The First Circuit joins the Sixth and Eighth Circuits in adopting this defendant-favorable standard, with only the Third Circuit requiring a less-stringent showing.
Background
The case turns on the interpretation of the phrase “resulting from” in a 2010 amendment to the AKS, which provides that a “claim that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].” 42 U.S.C. § 1320a-7b(g). Under this approach, the First Circuit said, an “AKS violation that results in a federal [healthcare] payment is a per se false claim under the FCA.” The First Circuit explained that the 2010 amendment “made it easier to bring an FCA action for damages by creating a pathway that does not require proof of a false certification.”
As we have covered, other district and appellate courts have grappled with this issue, which has taken on added significance given the government’s and relators’ frequent reliance on AKS-based FCA claims.
The Sixth and Eighth Circuits have ruled that a claim is false under the 2010 amendment only if the AKS violation is the “but-for” cause of the false claim. In contrast, the Third Circuit has ruled that although “there must be some connection between a kickback and a subsequent reimbursement claim,” an FCA plaintiff need not prove that the kickback was the but-for cause of the claim.
First Circuit Case
In the First Circuit case, United States v. Regeneron Pharmaceuticals, the government alleges that Regeneron violated the AKS by funding a charitable foundation that provided co-pay assistance to patients using its drug Eylea, an expensive medication for treating neovascular age-related macular degeneration. The government contends that when physicians later sought reimbursement from Medicare for these medications, the physicians’ claims were per se false under the 2010 amendment because they “resulted from” the underlying AKS violation.
Both parties moved the district court for summary judgment on causation. The government urged the district court to adopt the Third Circuit standard, while Regeneron advocated for the more-stringent “but-for” standard. The district court adopted the but-for standard, yet it also found the government’s evidence of causation sufficient to survive summary judgment even under this standard. Recognizing the importance of this issue, the district court permitted the government to file an interlocutory appeal to the First Circuit.
On appeal, the First Circuit sided with the Sixth and Eighth Circuits, holding that “the government must show that an illicit kickback was the but-for cause of a submitted claim.” To arrive at this holding, the court analyzed the text of the 2010 amendment to determine the meaning of “resulting from.” The court relied on Supreme Court precedent “that a phrase like ‘resulting from’ imposes a requirement of actual causality.” The court found that “there is no language in the 2010 amendment that by itself runs counter to the presumption that ‘resulting from’ calls for proof of but-for causation.”
The First Circuit explained that the “but-for” standard requires FCA plaintiffs to show that claims would not have been submitted to federal healthcare programs if not for the alleged kickbacks. This standard places a higher burden on the government or relators to prove causation and provides a valuable argument for defendants facing AKS-based FCA claims.
Takeaways
By joining the Sixth and Eight Circuits in adopting a but-for causation standard, the First Circuit’s opinion will encourage FCA defendants to advocate for but-for causation in circuits that have not addressed this issue. Given that circuit courts are now split 3-1 in favor of the but-for standard, other district and appellate courts may be more likely to adopt the but-for standard going forward. It remains to be seen whether the Supreme Court will intervene to resolve the circuit split or allow other courts of appeals to weigh in.
At the same time, Regeneron shows that adoption of the but-for causation standard does not automatically lead to the dismissal of AKS-based FCA claims. After all, the district court found that the government mustered sufficient evidence to survive summary judgment even under this standard.
The First Circuit also noted that its decision addresses only the new pathway created by the 2010 amendment. Expect the government and relators to respond in future cases by pleading false certification liability based on alleged AKS violations.
For more information about the False Claims Act, please contact the authors or subscribe to this blog. Please also be on the lookout for our forthcoming Healthcare Fraud & Abuse Annual Review, a comprehensive overview of last year’s key developments in healthcare fraud compliance and enforcement.