On February 18, 2025, the U.S. Court of Appeals for the First Circuit issued its ruling in United States v. Regeneron Pharmaceuticals, Inc., and joined a growing circuit split on the causation standard applicable to a False Claims Act (“FCA”) suit based on an Anti-Kickback Statute (“AKS”) violation. On the surface, the First Circuit adopted a strict, “but-for” causation standard which should make it more difficult for governments and whistleblowers to prevail on AKS-based FCA suits. However, a closer analysis shows that the Regeneron decision explicitly carves out an alternate pathway for liability that may render the causation requirement obsolete, and is likely to complicate the law on this issue.
I. Background on the False Claims Act and the Anti-Kickback Statute
False Claims Act
The FCA, 31 U.S.C. §§ 3729 et seq., is a powerful anti-fraud tool for the federal government. FCA enforcement is especially prevalent in the healthcare and pharmaceutical sectors; today, approximately 75% of FCA settlements are for healthcare fraud matters.[1] FCA liability attaches when an entity submits or causes to be submitted false or fraudulent claims for payment to federal healthcare programs such as Medicare, Medicaid, and TRICARE. The FCA also enables a private individual or whistleblower to bring lawsuits in the name of the government (called “qui tam” lawsuits).
Anti-Kickback Statute
The AKS, 42 U.S.C. § 1320a-7b, prohibits the payment or receipt (as well as soliciting and offering) of any remuneration (the kickbacks) in exchange for the referral of patients to a provider for services paid for (in whole or in part) by a government healthcare program. An AKS-based FCA suit is frequently brought by the government (as well as whistleblowers or “relators”). In fact, the highest recovery ever obtained under the FCA was from a case involving AKS violations by the drug manufacturer GlaxoSmithKline.[2]
In 2010, the AKS was amended to provide that “a claim for items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].” 42 U.S.C. § 1320a-7b(g) (the “2010 amendment”). Thus, for example, if a company pays money or something of value to induce patients to receive items or services for which claims for payment are submitted to a government healthcare program in violation of the AKS, those claims are also per se false within the meaning of the FCA. The question addressed by the First Circuit in Regeneron is what causal relationship between the remuneration and the submission of a false claim must be shown for the per se FCA liability to attach under the 2010 amendment.
II. The First Circuit Adopts a But-For Causation Standard for Per-Se FCA Liability for AKS Violations
Prior to First Circuit, three other circuits had opined on this very issue. The Sixth and Eighth Circuits have ruled that, due to the “resulting from” language in the 2010 amendment, the government must demonstrate but-for causation, which requires the government to show that the kickback-tainted claim would not have been submitted if the remuneration had not been paid. U.S. ex rel. Cairns v. D.S. Med. LLC, 42 F.4th 828, 834 (8th Cir. 2022); see also U.S. ex rel. Martin v. Hathaway, 63 F.4th 1043, 1052 (6th Cir. 2023). In contrast, the Third Circuit, relying heavily on the legislative history and purpose of the AKS, held that but-for causation is not required. Instead, the government must show that at least one patient is “exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient.” U.S. ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d 89, 100 (3d Cir. 2018).
In the Regeneron case, causation was somewhat tricky to prove because the alleged kickback was not paid directly to patients or their providers; instead, Regeneron allegedly donated more than $60 million to a charitable organization that provides copay assistance to patients that suffer from an eye condition called Age-Related Macular Degeneration (“AMD”). The government’s theory was that, by having the charity cover patients’ copay for Regeneron’s drugs, Regeneron induced prescriptions of Eylea, some of which resulted in claims for payment submitted to federal healthcare programs. However, the government did not demonstrate that any individual claim would not have been submitted absent the donations to the charity organization. In fact, the government admitted on appeal that it was “difficult to prove why a doctor prescribed a particular drug.” Opinion at 26 (internal quotation marks omitted).
Although acknowledging the difficulty faced by the government, the First Circuit found that the text of the 2010 amendment compelled the but-for causation standard. The First Circuit therefore joined the Sixth and Eighth Circuits to hold that, to prevail, the government “must show that an illicit kickback was the but-for cause of a submitted claim.” Opinion at 28.
III. The First Circuit Endorses an Alternative Theory of Liability That Does Not Require But-For Causation
The First Circuit’s decision, however, did not sound the death-knell for the government’s claims. This is because the First Circuit outlined an alternative theory of FCA liability for AKS violations that did not rely on the 2010 amendment. Instead, the First Circuit looked to case law preceding the 2010 amendment in which “many courts broadly agreed that AKS compliance could be a material precondition of Medicare reimbursement.” Opinion at 19. The First Circuit opined that the “false certification” theory established in these earlier cases survived the 2010 amendment and that claims under the false certification theory ran “on a separate track” than claims brought under the 2010 amendment. Opinion at 23.
Under the false certification theory, FCA liability attaches where a person or entity seeking payment “falsely certifies compliance with a particular statute, regulation or contractual term, [and] where compliance is a prerequisite to payment.” United States ex rel. Lemmon v. Envirocare of Utah, Inc., 614 F.3d 1163, 1168 (10th Cir. 2010). Because the certification of compliance with the AKS would be false whether or not the kickback actually resulted in a submitted claim, causation may not be a necessary element for the false certification theory. The First Circuit even suggested that “false-certification claims require no proof of causation.” Opinion at 23. In addition, the theory is widely available in most, if not all, FCA healthcare fraud cases because virtually all claims submitted to the government use a claims form containing a certification of compliance with the AKS. See CMS-1500 Form.
The Regeneron decision thus appears to close one door to FCA liability where evidence of but-for causation is lacking, but opens another (under the “false certification” theory). Although the First Circuit’s decision may appear to be a blow to FCA enforcement, the practical effect of the First Circuit’s decision is that it provides legal support for proving FCA claims based on AKS violations without any showing of causation at all.
It is unclear whether the First Circuit’s apparent endorsement of the false certification theory as an alternative to per se FCA liability under the 2010 amendment will be adopted by other courts. At least one district court has questioned the alternative false certification theory, since it appears to conflict with, and render obsolete, the “resulting from” language of the 2010 amendment. See United States ex rel. Louderback v. Sunovion Pharms., Inc., No. 17-cv-1719 (ECT/LIB), 2023 U.S. Dist. LEXIS 209990, at *36 (D. Minn. Nov. 27, 2023) (criticizing the false certification theory as rendering 42 U.S.C. § 1320a-7b(g) with “little practical effect”). Other courts may also discount the First Court’s analysis as non-binding dicta. Nevertheless, it is likely that the First Circuit’s rationale will be highly persuasive in many jurisdictions, at least until the circuit split on the AKS causation standard is resolved by the Supreme Court.
How Frier Levitt Can Help
Frier Levitt is a highly experienced law firm dedicated to serving physicians, pharmacies, and other providers in the healthcare and life sciences industries. Frier Levitt routinely represents healthcare and life sciences clients with Government investigations and litigation, including matters involving the AKS and the FCA. If you are a healthcare professional and you or your practice is the target of a government investigation or prosecution, please contact us for assistance.
[1] https://www.justice.gov/opa/pr/false-claims-act-settlements-and-judgments-exceed-268-billion-fiscal-year-2023
[2] https://www.justice.gov/archives/opa/pr/glaxosmithkline-plead-guilty-and-pay-3-billion-resolve-fraud-allegations-and-failure-report
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