What causation test is used to a False Claims Act (FCA) action that is based on a violation of the Anti-Kickback Statute (AKS), according to a recent judgement handed down by the Federal District Court for the District of Massachusetts? This is an important question that pertains to the enforcement of health care laws. According to the AKS, a claim that includes items or services “resulting from” a breach of the AKS constitutes a “false or fraudulent claim” under the FCA. This is because the AKS defines “resulting from” as “resulting from” a violation of the AKS. As was mentioned before, there is a division among the circuits over the causation criterion that should be used to the “resulting from” wording of the AKS. The Sixth and Eighth Circuits support a “but-for” causation requirement, however the Third Circuit has chosen to take a proximate cause approach.
Following in the footsteps of the Sixth and Eighth Circuits, the Massachusetts District Court has adopted the “But-For” Causation Standard for AKS-Based FCA Claims.
United States v. Regeneron Pharmaceuticals, Inc., Civil Action No. 20-11217-FDS was decided on September 27, 2023 by Chief Judge Saylor of the District of Massachusetts. In this decision, the “but-for” standard of causation was applied to the “resulting from” wording of the AKS. In doing so, Judge Saylor relied on the text of the legislation, an approach that is analogous to that taken by the Sixth and Eight Circuits and which Judge Saylor judged to be “persuasive.” Despite the fact that she applied a higher threshold for determining causation, Judge Saylor decided to deny Regeneron’s petition for summary judgement because she found that the government had given sufficient evidence to create a question that could be decided by the jury.
Eylea, which is manufactured by Regeneron, is a medication that treats neovascular (wet) age-related macular degeneration, sometimes known as “wet AMD.” This condition affects the eyes of older individuals more frequently than younger people. Medicare will pay for your Eylea treatment. The government asserted that Regeneron fraudulently transferred millions of dollars to the Chronic Disease Fund, an independent charitable organisation, in order to subsidise patient copayments for Eylea. In addition, the government argued that the Chronic Disease Fund covered copayments, deductibles, and coinsurance for Medicare beneficiaries who were prescribed wet AMD medications like Eylea. This aid was granted to people who were diagnosed with wet age-related macular degeneration. In 2014, Regeneron became the only company that contributed to the Chronic Disease Fund while also being a maker of one of the pharmaceuticals that were purchased with funds from the fund. The government asserted that Regeneron’s payments to the Chronic Disease Fund were in violation of the AKS and so constituted false claims in accordance with the FCA.
The parties’ motions for summary judgement were based on a number of different grounds, but the causation question stands out as particularly significant. In Guilfoile v. Shields, 913 F.3d 178 (1st Cir. 2019), the First Circuit Court of Appeals stated that if there is a “sufficient causal connection” between an AKS violation and a claim that is submitted to the government, then that claim is considered to be false in accordance with the FCA. This statement was made in response to a question posed by the parties in the case. However, in the case of Regeneron, the Supreme Court concluded that the FCA retaliation case of Guilfoile was not binding precedent. This was due to the fact that the decision in Guilfoile did not clarify what constitutes a “sufficient causal connection” and did not address the bar for proving an AKS-based FCA claim. Consequently, the Regeneron verdict was upheld.
The ruling in Regeneron followed the reasoning of the Sixth and Eighth Circuits when it determined that “but-for” causation should be applied. The Court came to the conclusion that the “but-for” criterion was appropriate because it was congruent with the “plain language” of the Act, which the Court interpreted as being straightforward and compatible with the principles of common-law causation. The Court explained that according to the customary instruments of statutory interpretation, legislative history does not have the authority to supersede the plain meaning of explicit statutory text. As a consequence of this, the Court decided that the proximate cause-based approach taken by the Third Circuit in United States ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d 89 (3d Cir. 2018) should not be followed. This approach needed merely a “link” between the alleged kickbacks and the medical care that was received, but the Court deemed it to be impractical and overbroad.
After using the “but for” criterion and resolving all questions in favour of the government at the summary judgement stage, the Court determined that there was a triable issue based on two primary grounds. First, the “matching” analysis conducted by the government’s expert report uncovered about 115,000 Medicare claims in which the Chronic Disease Fund paid some or all of the beneficiary’s copay for Eylea. Second, the government offered circumstantial evidence to support its contention that, in the absence of co-pay subsidies, medical professionals likely would have opted for a treatment other than Eylea.
Regeneron Establishes a Division of Authority Within the District, Which the First Circuit Court of Appeals Might Look Into in the Near Future
In an earlier case this summer, United States v. Teva Pharmaceuticals USA, Inc., C.A. No. 20-11548-NMG, 2023 U.S. Dist. LEXIS 122272, at *12-13 (D. Mass. July 14, 2023), Judge Gorton followed the broader proximate cause standard for AKS-based FCA claims that was articulated by the Third Circuit in Greenfield and as cited in Guilfoile. Following this, Judge Gorton took the unusual step of certifying an interlocutory appeal to the First Circuit Court of Appeals regarding the issue of causation. That appeal is still being considered. Given that the causality threshold is a dominating matter of law and that the outcomes in Regeneron and Teva reveal a substantial reason for difference of opinion, it seems likely that the First Circuit will be the next circuit to weigh in on this issue. Although interlocutory appellate review is a discretionary process, it is important to note that the causation requirement is a controlling question of law.
The Supreme Court Remains Uninvolved, at Least for the Time Being
In the meanwhile, the Supreme Court will refrain from intervening in the development of circuit case law, at least for the foreseeable future. In United States ex rel. Martin, et al. v. Darren Hathaway, et al., No. 23-139, on October 2, 2023, the Supreme Court dismissed the relator’s petition for review of the Sixth Circuit’s adoption of the “but-for” causation standard. The case involved the relator challenging the adoption of the “but-for” standard by the Sixth Circuit. There were two concerns at play in the Martin case: causality and payment, both of which contributed to the case’s reputation as a less-than-ideal candidate for certiorari. In addition, the causation test for AKS-based FCA claims has not been decided upon by nine of the country’s circuit courts. As the circuit divide continues to develop, we will continue to keep an eye on this situation.
