First Circuit’s Oral Argument in Rost Revisits Prior Case Law Expanding False Claims Act Liability


On May 8, 2012, the United States Court of Appeals for the First Circuit heard oral arguments in United States ex rel. Rost v. Pfizer, Inc. (10-2215). The central issues in the case are whether compliance with the federal Anti-Kickback Statute constitutes a precondition of payment for certain government benefits (in this case, Medicaid reimbursement), whether the claims presented to the government falsely represented compliance with a precondition of payment, whether the alleged kickback was material to the government’s decision to pay, and whether the party who allegedly offered the kickback had the requisite knowledge that a resulting claim would be rendered ineligible for payment. This marks the Court’s first opportunity to revisit two prior decisions that expanded the scope of False Claims Act (“FCA”) liability and created a split among the circuits: United States ex rel. Hutcheson v. Blackstone Med., Inc., 647 F.3d 377 (1st Cir. 2011) and New York v. Amgen, Inc., 652 F.3d 103 (1st Cir. 2011). It also marks the first time that the Court will address at the summary judgment stage the issues raised in those two cases.

In Rost, a relator sued Pharmacia Corp. (later acquired by Pfizer), alleging that it illegally gave kickbacks to physicians with respect to a drug called Genotropin in violation of the Anti-Kickback Statute (“AKS”). The relator claimed that these physicians prescribed Genotropin to patients and the pharmacies who filled these prescriptions later submitted Medicaid reimbursement claims, thereby violating the False Claims Act. Applying the analytic framework that was in wide use before the First Circuit’s decisions last year, the district court granted the defendant’s motion for summary judgment. The relator appealed.

Both the relator and the government (as amicus) argued that summary judgment was inappropriate based on a relatively straightforward application of Hutcheson and Amgen, the former of which held that FCA liability could exist even though the actual claim in question was submitted by an innocent third-party. The defendants, however, countered that Hutcheson and Amgen were distinguishable because the relator had not come forward with evidence that the pharmacies that actually submitted the Medicaid claims had represented, in provider agreements or otherwise, that the underlying transaction complied with the AKS. As a result, the relator failed to raise a genuine question whether the pharmacies made false representations in submitting their claims.

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