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Anti-Kickback Causation Standard Leads to Circuit Split

by Jessica Hoyer Estes | Feb 13, 2024 | Legal News, Whistleblowers

A split continues among the federal appellate courts on the proper causation standard to apply in False Claims Act (“FCA”) cases that are based on the Anti-Kickback Statute “AKS”). The split between courts is set to expand into the First Circuit, which will hear an interlocutory appeal to address the AKS/Causation standard. The case being heard is US v. Regeneron Pharmaceuticals (“Regeneron”), which is discussed in greater detail below. The First Circuit is expected to join the Third, Sixth and Eighth Circuits, which have already weighed in on the issue.

However, regardless of how the First Circuit rules, defense attorneys will continue to pursue but-for causation defenses to AKS-based claims until the Supreme Court resolves the circuit split.

Up Next: The First Circuit and Regeneron

In Regeneron, the government alleged that Regeneron, which manufactures the retinal injection drug Eylea, “funneled millions of dollars to the Chronic Disease Fund . . . – a purportedly independent charitable foundation- to subsidize co-pays for Eylea.” The coverage of patient co-pays made Eylea attractive to both patients and physicians and allowed Regeneron to charge a higher price for the drug. Regeneron allegedly profited in the tens of millions of dollars from the resulting increase in Eylea sales, much of which was covered by Medicare.

Notably in this case, there was no direct quid pro quo agreements or understanding between Regeneron and the prescribing doctors to prescribe Eylea in exchange for payments to the Chronic Disease Fund. Instead, the kickback scheme indirectly influenced doctors to prescribe more of Eylea due to the lower cost borne by the patient.

The causation standard applied is critical.

The government argued that a causation standard requires only a logical connection between the illegal kickbacks and the claims submitted to Medicare for reimbursement.

Regeneron argued the proper causation standard is the but-for causation standard (the government must prove that the doctors would not have prescribed Eylea but-for Regeneron making the payments to the Chronic Disease Fund). This is the issue before the First Circuit on appeal.

Current State of the US Courts on the AKS Causation Standard

Sixth and Eighth Circuits

The 2022 U.S. Court of Appeals for the Eighth Circuit decision in U.S. ex rel. Cairns v. D.S. Medical, along with the 2023 U.S. Court of Appeals for the Sixth Circuit decision in U.S. ex rel. Martin v. Hathaway both held that FCA claims based on AKS violation must satisfy the more stringent but-for causation standard. Both courts reached this conclusion based on the text of the 2010 amendment to the AKS, which provides, in relevant part: “a claim that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claims for purposes of [the FCA].” (See 42 U.S.C. §1320-7b(g)).

According to the Eighth Circuit, the phrase ‘resulting from’ “imposes . . . a requirement of the actual causality” and this “expresses a but-for causal relationship.” (See Cairns, 42 F.4th 828, 834).  Under the Sixth/Eighth Circuit standard, an FCA violation does not exists if the prescribing doctor would have submitted a claim regardless of whether a kickback was made.

Third Circuit

The U.S. Court of Appeals for the Third Circuit’s 2018 decision in U.S. ex rel. Greenfield v. Medco Health Solutions, Inc. relied on the legislative history and purpose of the AKS, and therefore 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.” If a patient is referred to a provider in exchange for a kickback, and the provider submits a claim for that patient, the causation standard is satisfied, even if the provider would have submitted the claim in absence of a kickback.

First Circuit

It is unsettled how the First Circuit will rule on this issue, but in its 2019 opinion in Guilfoile v. Shields, the court appeared to cite the Third Circuit’s Greenfield decision with approval, and specifically stated that the “resulting-from” language only requires a “sufficient causal connection between and AKS violation and a claim submitted to the federal government.”

Express False Certification Theory

The Sixth and Eighth Circuits adopted the but-for causation standard based on the statutory language in 42 U.S.C. §1320-7b(g). However, the split amongst the circuits leaves open whether it is possible for being an AKS-based FCA claim without relying on that statutory provision. Instead, litigants may seek to avoid that provision altogether by relying on an “express false certification” theory of FCA liability.

Under the express false certification theory, FCA liability attaches where a person or entity seeking payment certifies that it has complied with a particular legal or contractual requirement that is a condition of payment.

Because it is well-settled that compliance with the AKS is a material condition of payment for government health programs, the government may begin to take the position that they need not prove that any false claims resulted from the payment of kickbacks– which would trigger the stricter, but-for causation standard– because, regardless of causation, the provider certified compliance with the AKS and the certification is false.

Although the District of Minnesota appears to support the express false certification theory, it is not yet clear whether the theory will continue to hold any water, especially on appeal, because this theory would effectively render the AKS language in 42 U.S.C. §1320-7b(g) ineffective.

Current Landscape of AKS Litigation

The growing split between circuits means that it is more important than ever where FCA cases are filed if they include AKS violations. If a jurisdiction has adopted the but-for causation standard, the governrment and relators will have a more difficult time overcoming motions to dismiss, etc. Additionally, the but-for causation standard could potentially negatively impact the government’s ability to bring any FCA suits based on indirect kickback schemes, such as the one at issue in Regeneron. One thing to keep in mind– the but-for standard only applies to FCA suits, and not to criminal prosecutions under the AKS itself, which may provide the government to opt for criminal enforcement instead of recourse through the FCA. This could be problematic for relators. In the meantime, attorneys handling AKS claims await the Regeneron decision and the inevitable Supreme Court decision down the road to help clarify the appropriate causation standard for AKS allegations under the FCA.


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