District of Massachusetts Adopts But-For Causation Test for FCA Claims Premised on AKS Violations

As reported last week here, the Chief Judge of the District of Massachusetts held that a claim “result[s] from” a kickback only if the defendant would not have included particular items or services in the claim but for the kickback.  United States v. Regeneron Pharma., Inc., No. 20-11217-FDS (D. Mass. Sept. 27, 2023).  In so holding, the court aligned itself with decisions in the Sixth and Eighth Circuits, and rejected the Third Circuit’s looser standard that a false claim “result[s] from” a kickback where a patient was merely “exposed to an illegal recommendation or referral” and a physician submitted a claim “pertaining to that patient.”  We have previously reported on this circuit split here and here.

In Regeneron, DOJ alleged that the defendant drug manufacturer violated the AKS by subsidizing patient copays to induce physicians to prescribe the defendant’s drug.  A DOJ expert performed a “matching” analysis that “linked” more than a hundred thousand submitted Medicare claims for the drug to subsidized copays in the relevant period.  Thus, in its usual approach, DOJ asserted that all of those claims were rendered false by the underlying AKS violation.  The suit survived a motion to dismiss and both parties moved for summary judgment.

As amended by the Patient Protection and Affordable Care Act, the AKS provides that a claim “that includes items or services resulting from a violation” of the AKS constitutes a false claim.  Interpreting this language, the Chief Judge held that “resulting from” requires that the AKS violation—the unlawful kickback—have been a but-for cause of the “medical decision that resulted in the false claim.”  Both the Sixth and Eighth Circuits have concluded that the statutory text unambiguously suggests but-for causation.  And as the Eighth Circuit noted, but-for causation is the “default” rule against which Congress legislates.

Opting for but-for causation, the Chief Judge unequivocally rejected DOJ’s proffered approach, which essentially mimicked the Third Circuit’s view.  In Greenfield, the Third Circuit held that “resulting from” requires merely (1) that a patient have been “exposed to an illegal recommendation or referral” and (2) that the physician have submitted a claim “pertaining to that patient.”

The Chief Judge observed that this “exposure” standard is neither “set forth in the statute” nor part of the “familiar common-law framework” that Congress intended to incorporate.  Indeed, the exposure test does not even require “the government to prove actual causation—that is, that the AKS violation actually caused the provision of the medical services that led to the false claim.”  The court concluded that the Third Circuit’s approach is “unclear and its application in specific factual contexts is uncertain.”

That being said, the Chief Judge noted that but-for causation did not make DOJ’s burden “insuperably difficult.”  “To begin, under tort law, but-for causation does not normally require that an actor be the sole factual cause of a harm”—i.e., DOJ did not need to prove that the AKS violation was “the only cause of the resulting false claim.”  And evidence of but-for causation could include—“in the right circumstances”—“temporal proximity.”  Indeed, the court saw sufficient evidence of causation to deny Regeneron’s motion for summary judgment.  In addition to the expert report purporting to “match” Medicare claims to subsidized copays, the court cited evidence that a rival therapy was “dramatically” cheaper than Regeneron’s.  “[I]t is surely true that physicians and patients alike would take the out-of-pocket cost of a drug into account when making medical decisions.  That would be particularly likely here, where [the drug] was a buy-and-bill drug that would leave the physician’s practice bearing the cost of any unpaid copay obligations.”  Thus, the court has left to the jury the task of determining whether and to what extent the alleged kickbacks (if an AKS violation can be established) were the but-for cause of the Medicare claims.

The District of Massachusetts’s opinion is available here.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.