The decision to adopt but-for causation as the methodology for determining liability in cases brought under the False Claims Act (also known as the “FCA”) and founded on alleged violations of the Anti-Kickback Statute (also known as the “AKS”) was made by the Chief Judge of the District of Massachusetts on September 27, 2023. In a decision that has been widely cited, United States ex rel. Greenfield v. Medco Health Solutions, from the Third Circuit Court of Appeals in 2018, the Court of Appeals for the District of Massachusetts decided to align itself with the criteria that has been adopted more recently by the Eighth and Sixth Circuits.
The Situation
In 2010, Congress updated the AKS to provide that any Medicare claim that contains commodities or services “resulting from” a violation of the AKS constitutes a false or fraudulent claim for purposes of the False Claims Act. This provision may be found at 42 U.S.C. 1320 a-7b(g). In addition, the AKS was renamed the Administrative Knucklehead Statute. The question that arises as a consequence, one that has stumped jurists and litigants for years, is this: what exactly does “resulting from” mean?
In the case Greenfield v. Medco, which was heard in the District of New Jersey in 2013, the court was the first to attempt to answer the question. On appeal, the Third Circuit investigated the legislative history of both the False Claims Act and the Administrative Procedure Act in order to uphold the judgement of the lower court that Relator had failed to prove a sufficient connection between the alleged bribe and the reimbursement claim. According to the decision of the Third Circuit Court of Appeals, there must be “some connection” or a “link” between a kickback and a subsequent reimbursement claim. The court did not agree with the relator’s “taint” argument, which held that any reimbursement claim would be invalid if it was discovered that a kickback had been given. The Supreme Court also decided that a but-for causation standard was “too exacting,” and instead came to the conclusion that the necessary causal link exists when “a particular patient is exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient.” This is the standard that is frequently and now commonly referred to as the “exposure” standard. Greenfield’s exposure criterion, on the other hand, has recently come under scrutiny, and some courts have begun to stray from it. The Eighth Circuit Court of Appeals, in United States ex rel. Cairns v. D.S. Med. LLC (2022), and the Sixth Circuit Court of Appeals, in United States ex rel. Martin v. Hathaway (2023) (cert. denied), both declined to adopt the Greenfield standard. Instead, they utilised a textual statutory analysis to come to the conclusion that the phrase “resulting from” means but-for causation. This was done in their respective cases. Courts in the First Circuit, which is a hotbed of False Claims Act litigation and enforcement activities in the healthcare business, had been applying the Greenfield interpretation up until this point.
The People of the United States v. Regeneron
One of two highly watched FCA cases currently ongoing in the District of Massachusetts, United States v. Regeneron is one of the cases that involves charges that pharmaceutical manufacturers utilised charities to funnel copay assistance to patients taking the pharmaceuticals manufactured by the manufacturers in violation of the AKS. The other case is United States v. Akorn, Inc. In its motion for summary judgement, Regeneron maintained, among other things, that the government cannot establish that its donations resulted in the submission of any false Medicare claim, and it contended that the but-for causation standard should be applied. In spite of the fact that the government admitted that it bore the responsibility of establishing some kind of causal connection, it argued that the Greenfield standard ought to be used, and that in order to demonstrate a causal link, the government merely needed to “establish only that the claims at issue were exposed to illegal remuneration.”
The government argued that it was irrelevant whether the patients would have continued to take the medication even in the absence of the alleged kickbacks, citing previous decisions from the District of Massachusetts (United States ex rel. Bawduniak v. Biogen Idec Inc. and United States v. Teva Pharmas. USA, Inc.) and the First Circuit (Guilfoile v. Shields). These cases were decided in Massachusetts. According to the government, the question that really matters is whether or whether Regeneron had the intention of convincing patients to buy Eylea, which is one of Regeneron’s products. The government further argued that because the Court had, when denying Regeneron’s motion to dismiss two years ago, cited Greenfield, Guilfoile, and Bawduniak with approval in concluding that because the complaint plausibly alleged that the copay assistance system “involved the payment of kickbacks or remuneration to patients” and “some of those kickback-tainted prescriptions then led to Medicare claims for Eylea” the rejection of
Before discussing the causation standard, the Court took into consideration the government’s law of the case argument and came to the conclusion that it was not bound by its own earlier decision. This was due to the fact that the opinion addressed the causation issue only “at a relatively superficial level” and was not informed by the decision of the Eighth Circuit in Cairns or the decision of the Sixth Circuit in Martin, both of which had not been decided at the time. Both of these cases were still pending.
When the Court turned its attention to the investigation of the question of causation, it reached the conclusion that the Greenfield test is “riddled with problems” due to the fact that it is not only disconnected from the fundamental principles of statutory interpretation but also from the time-honored common-law rules of causality. In order to demonstrate that the meaning of the term “exposed” in the Greenfield standard is obscure and that it is impossible to differentiate it from the “taint” criterion, the Court utilised a straightforward hypothetical example. The court also clarified that if the Greenfield standard is taken to its logical conclusion, it might result in situations in which an AKS violation could result in liability even if all prescribing physicians were uninformed of the breach and the violation did not result in even a single extra referral. When considered in light of these factors, it is not evident how an enticement of this kind might “result in” fraudulent assertions.
Instead, the Court relied on the reasoning of statutory construction that was presented in Cairns and Martin and came to the conclusion that the “resulting from” wording mandates a determination that the but-for causation threshold is applicable. The Court’s explanation in Martin made clear that the typical meaning of “resulting from” is but-for causality, and the fact that the legislative history does not supersede the conventional meaning of the text does not change this.
A huge victory for defendants who have been trying for a long time to present evidence to rebut causation but have been hampered by the Greenfield exposure standard, the decision and analysis of the Court could have a significant impact in establishing but-for causation as the majority standard in FCA cases based on the AKS. This would be a huge win for defendants who have been trying for a long time to present evidence but have been hampered by the Greenfield exposure standard.
