The U.S. District Court for the District of Massachusetts recently weighed in on the burgeoning court split in False Claims Act (FCA) cases, adopting an approach that puts a higher burden on the government to prove Medicare reimbursement submissions were directly caused by allegedly illegal kickback payments.1 At issue was the FCA’s language that the Medicare submission “resulting from” an alleged kickback is a per se false claim. In interpreting the statutory language, Chief Judge F. Dennis Saylor IV ruled that the alleged kickbacks must be the “but for” cause of improper Medicare reimbursement submissions in order to violate the FCA. Judge Saylor’s ruling sets up an intra-circuit split after another District of Massachusetts judge in a similar case previously rejected the “but for” test in favor of a less exacting approach.2
This most recent case, United States v. Regeneron Pharmaceuticals, involves a pharmaceutical company that manufactures Eylea, a drug to treat an eye disease that primarily affects elderly people. The government’s theory stems from an amendment to the Anti-Kickback Statute (AKS) as part of the 2010 Patient Protection and Affordable Care Act that makes any Medicare claim “resulting from” a violation of the AKS a false or fraudulent claim for purposes of the FCA.3 This statutory change was long sought by the government, who have argued that reimbursements for health care services tainted by kickbacks were per se false claims. In Regeneron, the government is arguing that the company induced physicians to prescribe Eylea by donating millions of dollars to a patient-assistance foundation to help patients cover copays for the medication. Regeneron is one of a series of “copay cases” brought by the U.S. Attorney’s Office in the District of Massachusetts that has alleged that pharmaceutical companies’ donations to copay charities that assist patients to purchase their medication were kickbacks.4
In his summary judgment order last month, Judge Saylor held that “improperly structured donations to copay-assistance charities may violate the AKS if they are made with the intent to induce Medicare-funded referrals or drug purchases.”5
Judge Saylor’s ruling will soon be reviewed—either directly or indirectly—by the First Circuit, which is set to consider the issue in another copay case, United States v. Teva Pharmaceuticals USA et al.6 According to a report in Law360, Judge Saylor said on October 18, 2023, that he may allow for an appeal of his summary judgment order in light of the conflicting ruling in Teva Pharmaceuticals.7 In that case, Judge Nathaniel M. Gorton rejected a strict “but for” test, adopting instead a standard requiring only “some connection” or “sufficient causal connection” between the kickback and reimbursement claim.8 This past August, Judge Gorton granted Teva Pharmaceuticals’ motion to certify the court’s order for interlocutory appeal and stayed the pending trial. To date, the First Circuit has addressed the issue only in passing, noting that “if there is a sufficient causal connection between an AKS violation and a claim submitted to the federal government, that claim is false within the meaning of the FCA.”9 The court did not, however, specify a standard for whether a sufficient causal connection had been established.
Outside of the First Circuit, the circuit courts are already split. The “but for” approach has been adopted by the Sixth10 and Eighth11 Circuits, though rejected by the Third Circuit.12 Specifically, the Third Circuit adopted a more lenient “some connection” standard in which the federal government need only identify claims that were “exposed to” illegal renumeration.13 That court concluded that once the government has established an AKS violation occurred, proving a causal link requires “a particular patient [to be] exposed to an illegal recommendation or referral and a provider [that] submits a claim for reimbursement pertaining to that patient.”14
In its motion for partial summary judgment in Regeneron, the government argued that the First Circuit had endorsed the “some connection” standard that it had cited in passing. Judge Saylor rejected that argument, concluding that the issue had only been addressed at “a relatively superficial level” and without the benefit of subsequent rulings from the Sixth and Eighth Circuits.15
Judge Saylor ultimately adopted those circuits’ “but for” standard, finding their analysis persuasive. The Eighth Circuit held that the “resulting from” language in the FCA discussing the AKS expresses a “but-for causal relationship,” so “when a plaintiff seeks to establish falsity or fraud through the 2010 amendment, it must prove that a defendant would not have included particular ‘items or services’ but for the illegal kickback.”16 Adopting this reasoning, the Sixth Circuit cautioned that a loose reading of causation would sweep too broadly, failing “to protect doctors of good intent, sweeping in the vice-ridden and virtuous alike.”17 Judge Saylor found these cases persuasive, concluding in Regeneron that “[t]he adoption by Congress of the ‘resulting from’ language in the statute requires a finding that the appropriate standard is but-for causation.”18 But this will certainly not be the last word on the issue.
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