Massachusetts District Judge rules that government must clear high causation bar in False Claims Act cases
On September 27, 2023, the District of Massachusetts in United States v. joined the US Court of Appeals for the Sixth and Eighth Circuits in ruling that the government and relators pursuing False Claims Act (FCA) suits premised on violations of the Anti-Kickback Statute (AKS) must establish that the false claim would not have occurred “but for” the illegal kickbacks. The Regeneron opinion is available here.
The FCA suit against Regeneron has its roots in a years-long investigation by the DOJ into the pharmaceutical industry’s relationship with charitable organizations that assist patients in meeting out-of-pocket costs for drugs. Although many companies eventually settled claims, the DOJ sued Regeneron and Teva.
In the suit against Regeneron, the DOJ alleges that the drug manufacturer paid millions of dollars to a charitable foundation to subsidize patient copays for its macular degeneration drug, Eylea. According to the DOJ, the purpose of the payments was to induce physicians to increase prescriptions at the expense of the Medicare Part B program and violated the AKS.
After both parties moved for summary judgment on the issue of causation, the Chief Judge of the District of Massachusetts allowed the case to proceed to trial, but in so doing held that the government must prove that the alleged kickbacks were the “but for” cause of the “false” Medicare claims. The Chief Judge took a side in the deepening federal court split and disagreed with one of his Massachusetts colleagues, who is overseeing the parallel case against Teva and ruled earlier this summer that a lower causation standard applied. The Teva opinion is available here.
Since Congress amended the AKS in 2010 to provide that Medicare payments “resulting from” an AKS violation constitute a per se claim under the FCA, courts across the nation have split on the standard of causation required to prove such claims. As we previously wrote in our False Claims Act Year in Review 2022 and False Claims Act Alert, the Sixth and Eighth Circuits have held that relators must meet a “but for” causation standard, rather than the standard articulated by the Third Circuit.
The Third Circuit’s approach requires only “some connection between a kickback and a subsequent reimbursement claim,” which the district court in Regeneron recognized is “fraught with problems.” As the Sixth and Eighth Circuits observed, “that standard is divorced from the actual language of the statute and from basic principles of statutory interpretation.” It is also “disconnected from long-standing common-law principles of causation” and “effectively bars the [FCA] defendant from contesting the government’s evidence of causation once an AKS violation is proved.”
In the Regeneron decision, the Chief Judge reasoned that the only pronouncement from the First Circuit on the standard of causation, which is that there must be “a sufficient causal connection” between an AKS violation and the false claim, was not effectively the Third Circuit’s standard, rejecting DOJ’s argument and departing from the decisions of at least two other Massachusetts district judges who have followed the Third Circuit’s lead.
Indeed, just two months prior, another court in the District of Massachusetts issued a summary judgment opinion in United States v. Teva Pharmaceuticals USA, Inc., which sided with the Third Circuit’s relaxed causation standard. The Teva court, however, then allowed the FCA defendant to pursue an interlocutory appeal on the requisite causation standard. Thus, the First Circuit will now have the opportunity to take a side.
The Regeneron decision by the Massachusetts District’s Chief Judge is notable for at least three reasons. First, it erects a significant hurdle for the government to clear in one of the DOJ’s signature FCA cases against the pharmaceutical industry. Second, its thorough analysis provides another arrow in the quiver of both litigating and putative FCA defendants around the country who are advocating for the use of the higher causation standard. Third, it not only cinches the prospect of a definitive ruling by the First Circuit, but it also enhances the already-increasing likelihood that the US Supreme Court will step in and decide the issue once and for all.
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