On February 18, the US Court of Appeals for the First Circuit issued its long-awaited decision in United States v. Regeneron Pharmaceuticals, Inc.1joining a high-profile circuit split on the extent of the causal connection required for claims "resulting from" violations of the federal Anti-Kickback Statute (AKS) to be definitionally false under 42 U.S.C. § 1320a-7b(g), which was enacted in 2010 as part of Obamacare. The First Circuit agreed with Chief Judge F. Dennis Saylor of the District of Massachusetts that §1320a-7b(g) imposes liability under the False Claims Act (FCA) for claims "resulting from" AKS violations, provided that those kickbacks cause a claim's submission to a federal healthcare program. It is not sufficient that a kickback was paid in connection with a prescription that was later reimbursed by a federal healthcare program. Instead, the kickback must have altered the doctor's prescribing choice or otherwise caused the submission.
The First Circuit joins the Sixth and Eighth circuits in adopting this "but-for" causation standard. In contrast, the Third Circuit remains alone in applying a more relaxed "causal connection" standard. The crystallizing circuit split increases the chance of Supreme Court review.
In the meantime, however, this holding offers companies and other defendants a crucial argument against FCA liability premised on AKS violations. In cases where a provider would have prescribed and sought reimbursement for a drug or device regardless of any kickback, Regeneron protects against FCA liability for that reimbursement. This significantly narrows the number of claims that § 1320a-7b(g) would have otherwise rendered automatically false under the looser causation standard adopted by the Third Circuit.
I. Legal Background
The AKS imposes civil and criminal liability for "knowingly and willfully" offering or paying any remuneration—such as kickbacks, bribes, or certain types of rebates—to entice someone to purchase goods, facilities, or services that may be partially or fully covered by federal healthcare program.2In practical terms, "remuneration" under the AKS most typically takes the form of expensive dinners, invitations to extravagant educational conferences, honoraria for speaker programs, and other paid consulting arrangements with physicians. Although AKS violations can be enforced either as civil or criminal violations, they are more often enforced via the FCA. The FCA forbids "knowingly" making false statements or misrepresentations on an application for payment or benefit, including under a federal healthcare program.3 Prior to the enactment of §1320a-7b(g), a reimbursement claim for medical goods or services under a federal healthcare program could be considered false if the claimant had engaged in an AKS violation but certified—either expressly or implicitly—that the submitter was in compliance with federal law. However, this theory of liability required the government (or relator) to prove (1) either implicit or express certification in the claim and (2) that such certification was a condition of payment of that claim.4 This often presented both legal and evidentiary challenges to establish FCA liability based on AKS violations.
Obamacare, officially known as the Patient Protection and Affordable Care Act,5was enacted in 2010. In the law, Congress included a provision intended to lessen the proof burden for establishing FCA liability based on AKS violations. Specifically, the provision states that a claim for payment from a federal healthcare program is per se false if it "includes items or services resulting from a violation of the AKS."6Violations of the FCA can be pursued by whistleblowers, known as qui tam relators, and can result in treble damages and statutory penalties.7 In other words, as long as the government can establish (1) an AKS violation, and (2) the submission of claims "resulting" from such violations, it is relieved of any need to show any implicit certification of AKS compliance.
As a result of §1320a-7b(g)'s enactment, the government has more easily extracted a significant number of high-dollar FCA settlements based on AKS violations. This is largely due to a broad reading of "resulting from."8 The government's typical position was that every claim that was submitted for a particular good or service where there was a pattern of providing healthcare providers with some sort of "remuneration" in connection with that good or service was considered false and materially misleading. Because these patterns of purported AKS violations often span several years and encompass hundreds of thousands, if not millions, of claims, the government could often threaten pharmaceutical and medical device companies with liability in the hundreds of millions of dollars, given the FCA's provisions for treble damages and per-claim penalties.9 However, outside of the government settlement context, where the government and relators have proceeded to litigate FCA claims, defendants have advocated for a narrower construction of "resulted from"—i.e., one that requires proof of "but for" causation.
The case law interpreting this provision has eventually evolved into a circuit split. The Third Circuit found that there needed only to be some sort of "causal link," which can exist even if the item or service would have been prescribed and subject to reimbursement regardless of any kickback.10This was a plaintiff-friendly test that meant that defendants could be held liable for nearly every prescription submitted for federal reimbursement that was in any way tethered to a kickback however attenuated, a position largely in line with that taken by the government when engaging in pre-litigation settlement discussions. In contrast, the Sixth and Eighth Circuits adopted a narrower "but for" causation standard. Those two circuits have held that §1320a-7b(g) only makes a claim false if the healthcare services at issue would not have been provided "but for" the alleged kickbacks.11While there is some variation in the interpretation of §1320a-7b(g) among district courts in other circuits, including differing views among judges within the District of Massachusetts,12 most courts have applied the Third Circuit's less stringent "causal link" standard.13
II. The District Court Opinion
By way of background, Regeneron manufactures a drug called Eylea, a treatment for wet age-related macular degeneration (AMD). This eye disease causes abnormal blood vessels to leak fluid and blood, damaging the macula and leading to vision loss.
Physicians purchase Eylea, prescribe it to patients, and administer it in their offices before submitting a reimbursement claim. Under Medicare Part B, Medicare covers 80% of Eylea's cost, and the patient covers the remaining 20%. However, during the relevant time period, Eylea cost $1,850 per injection. As a result, patients routinely face copays of over $2,000 per year because treatment requires multiple injections. To help make Eylea more affordable for patients unable to pay that amount, third-party patient copay assistance foundations use donations to help defray the cost. Drug and device manufacturers often donate to such third-party foundations, which ultimately help patients afford the manufacturer's drug or device. In Regeneron, the government alleged that the company paid more than $60 million over roughly five years to the Chronic Disease Fund (CDF), a foundation that offers copay assistance to patients suffering from wet AMD. As alleged by the government, Regeneron's payments to CDF for copay assistance constituted a kickback scheme in violation of the AKS and, therefore, the FCA.14
After the close of discovery, Regeneron moved for summary judgment, arguing in relevant part that even if its payments to CDF constituted AKS violations—a point Regeneron strongly disputes—those purported violations did not cause physicians to prescribe a drug that they would not have otherwise prescribed. Therefore, Regeneron contended that these actions did not "result" in a claim under § 1320a-7b(g).
In opposing summary judgment, the government argued that the district court should follow the Third Circuit's ruling in Guilfoile v. Shields,15 which requires only that "a particular patient is exposed to an illegal...
