First Circuit Rules Against Government in False Claims Act Case

On Feb. 18, in U.S. v. Regeneron Pharmaceuticals, the First Circuit Court of Appeals joined the Sixth Circuit and the Eighth Circuit in holding that, for purposes of establishing that a claim for payment of items or services under a federal health care program constitutes a false claim on account of its resulting from a violation of the Anti-Kickback Statute (AKS), the term “resulting from” requires that the government or qui tam whistleblower, as applicable, establish that “but-for” the violation of the AKS, the claim would not have been submitted. (As explained below, the Third Circuit had previously concluded otherwise.)

Requiring “but-for” causation as opposed to a less restrictive definition of “resulting from” makes it much more difficult for the government or whistleblower to prove a False Claims Act (FCA) violation in the presence of an AKS violation and to recover damages.

Background

Regeneron manufactures a drug called Eylea. Eylea is one of a few drugs approved by the Food and Drug Administration for treating an ophthalmological condition called neovascular age- related macular degeneration.

Over a four-to-five-year period, Regeneron paid more than $60 million to the Chronic Disease Fund (CDF), a foundation that provides copayment assistance to patients suffering from that condition.

The government alleged that, in violation of the AKS, Regeneron knowingly induced prescriptions of Eylea by covering copayments for patients who received the drug, and that when physicians filed Medicare claims for Eylea prescribed to patients receiving copayment assistance, those claims “resulted from” a violation of the AKS irrespective of whether those claims would have been made even had Regeneron not covered the co-pay.

Based on 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)), the government asserted that those Medicare claims were “false or fraudulent” and therefore violated the FCA.

In so asserting, the government’s position was that “all that is required to prove a causal link [under the 2010 amendment] is that ‘a particular patient is exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient.'” (Quoting United States ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d 89, 100 (3d Cir. 2018).)

Regeneron, on the other hand, asserted that a claim only results from an AKS violation if it includes items or services that would not have been paid for by the government absent the AKS violation. It further argued that the government carries the burden of proof in that regard.

In other words, according to Regeneron, the AKS violation, in this case some or all of the contributions to the CDF to fund co-pays (which for purposes of the case were assumed to be unlawful kickbacks) must be a “but-for” cause of the alleged false claim. Differently stated, if a physician would have purchased (and sought reimbursement for) Eylea anyway, then the subsequent Medicare claim cannot have resulted from the allegedly illegal payment.

Faced with this issue and with competing motions for summary judgement, the district court ruled in favor of Regeneron. Nevertheless, noting that there was a conflict in the case law on this issue and explaining that the issue was pivotal to the outcome in this and another case in the circuit, the court held that an immediate appeal would materially advance the ending of the case. Accordingly, the district court sought, and the First Circuit granted, interlocutory review.  The appeals court affirmed the district court’s ruling holding that to treat an AKS violation as a false or fraudulent claim under the FCA, the government must prove that the AKS violation was the “but-for” cause of the false claim.

Previously Decided Cases Outside the First Circuit

Several previously decided cases in other circuits had addressed this issue.

Supporting the government’s position, the Third Circuit in United States ex rel. Greenfield v. Medco Health Solutions, Inc., 880 F.3d 89, 95 (3d Cir. 2018), had rejected the “but-for” requirement holding instead that there must only be some linkage between the AKS violation and the filing of the claim.

Relying in part on its interpretation of the legislative history and the purposes behind the amendments, the court held that for an FCA violation to occur the government or the plaintiff-whistleblower must only prove that at least one of the claims for which reimbursement was sought was provided in violation of the AKS.

Supporting Regeneron’s position and consistent with the First Circuit’s holding were cases out of the Eighth Circuit and the Sixth Circuit.  In both U.S. ex rel. Cairns v. D.S. Med. LLC, 42 F.4th 828 (8th Cir. 2022) and in United States ex rel. Martin v. Hathaway, 63 F.4th 1043 (6th Cir. 2023), the courts held that the phrase “resulting from” in the 2010 amendment to the AKS, imposed a “but-for” causation requirement. In so holding, both courts looked to the Supreme Court’s prior decision in Burrage v. United States, 571 U.S. 204 (2014), a case involving “results from” language in the Controlled Substances Act and in which the Court concluded that the ordinary meaning of “results from” imposes a requirement of actual causality.

The Court’s Analysis as to Regeneron

The First Circuit commenced its analysis by also looking to the Court’s opinion in Burrage. In this regard, the court explained that the phrase “resulting from” imposes a requirement of actual causality and that in the ordinary course this takes the form of “but-for” causation. That said, the court also explained that it may deviate from this ordinary course if the statute in question provides “textual or contextual indications” for doing so.

According to the court, a textual indication draws on the plain text of the statute’s causation language, while a contextual indication arises from the substance or structure of the statutory scheme as a whole.

As for the use of the phrase “resulting from” in the 2010 amendment, the court found no convincing textual or contextual reason to deviate from the default presumption that the phrase “resulting from” as used in the amendment imposes a “but-for” causation standard.

With regard to there being a textual basis, according to the court: “Simply put, 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.”

With regard to there being a contextual basis, the court considered and rejected several contextual arguments advanced by the government: that the  AKS itself — including its imposition of criminal liability — requires no proof that the government would not have paid a claim but for the inducement of the offered kickback; that certain statutory and legislative history supports its position that the “but-for” standard is incorrect; and that it can “sometimes be difficult” to prove why a doctor prescribed a particular drug.

Having found neither a textual nor contextual basis for deviating from the default rule, the appeals court affirmed the judgment of the district court concluding, consistent with the Sixth and Eighth Circuits, that “to demonstrate falsity under the 2010 amendment, the government must show that an illicit kickback was the but-for cause of a submitted claim.”

Note: With the continued split among the circuit courts, and given the sheer magnitude of what is at stake from a monetary standpoint insofar as questions of liability are concerned, the obvious next question is whether the Supreme Court will conclude that it is time for it to grant certiorari, which will presumably be sought, and resolve this issue (recognizing of course that the Court’s docket is likely to be more than “adequately” full in the year ahead).