The U.S. Court of Appeals for the First Circuit, in United States v. Regeneron, has joined the Sixth and Eighth Circuits in adopting the “but-for” standard to find that a violation of the Anti-Kickback Statute (AKS) triggers the False Claim Act (FCA). The First, Sixth, and Eighth Circuits have adopted the burdensome “but-for” causation standard to prove that a violation of the AKS also violates the False Claims Act. This arguably makes it more difficult for the government to establish liability. The Third Circuit is now the lone Circuit that has adopted a more lenient “causal link” standard. This widening split among the federal circuit courts may motivate the United States Supreme Court to clarify the appropriate applicable standard.
First Circuit Decides United States v. Regeneron Pharmaceuticals, Inc.
Regeneron manufactures Eylea, a drug approved by the U.S. Food and Drug Administration (FDA) for treating an ophthalmological condition. The economics behind Medicare Part B create an incentive for Regeneron to price Eylea in a manner that frees the patient from the co-pay.
The government in United States v. Regeneron Pharmaceuticals, Inc. alleged that Regeneron paid more than $60 million over the course of four to five years to a foundation that provided co-payment assistance to patients suffering from an ophthalmological condition and that some or all of those donations were unlawful kickbacks.
The long-awaited decision in this case called for the First Circuit to determine the meaning of the words “resulting from” as used in a 2010 amendment to the federal Anti-Kickback Statute.
FCA Liability Standard for AKS Violations
The AKS imposes criminal liability on anyone who “knowingly and willfully offers or pays any remuneration (including any kickback, bribe, or rebate)” to induce a person to “recommend … ordering any … service … for which payment may be made in whole or in part under a [f]ederal health care program.” 42 U.S.C. § 1320a-7b(b)(2). Thus, the AKS targets any remunerative scheme through which a person receives or solicits payment in return for directing a patient to a program under which payments may be made from federal funds.
A 2010 amendment to the AKS established an express link to the False Claims Act. Therefore, the AKS now provides that “a claim that includes items or services resulting from a violation of [that Statute] constitutes a false or fraudulent claim for purposes of [the False Claims Act].” 42 U.S.C. § 1320a-7b(g). In other words, an “AKS violation that results in a federal [healthcare] payment is a per se false claim under the FCA.” Guilfoile v. Shields, 913 F.3d 178, 190 (1st Cir. 2019).
The FCA, in turn, imposes civil liability on anyone who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval” or “knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim.” 31 U.S.C. § 3729(a)(1)(A), (a)(1)(B).
Importantly, the AKS does not define the term “resulting from.” Accordingly, the Circuits have split in their interpretation of the AKS statute’s meaning of the words “resulting from.”
Notably, the Supreme Court denied certiorari following the Sixth Circuit’s decision to adopt the more stringent “but-for” causation standard. However, the First Circuit’s decision and the widening Circuit split may finally motivate the Supreme Court to clarify the appropriate applicable standard when evaluating the meaning of “resulting from” as set forth in 42 U.S.C. § 1320a-7b(g).