DOJ Faces Pushback At First Circuit On Expansive Causation Standard for AKS-Based FCA Claims
On July 22, 2024, the First Circuit Court of Appeals heard oral argument on what the appropriate standard of causation is for AKS-based FCA claims—specifically, whether a “claim” under the FCA “result[s] from” a kickback only if the claim would not have included the items or services but for the kickback. The District of Massachusetts certified this issue for appellate review after adopting the but-for causation standard in United States v. Regeneron Pharma., Inc., 2023 WL 6296393 (D. Mass. Sept. 27, 2023), as we previously reported here. The panel was made up of Judges O. Rogeriee Thompson, William Kayatta, and Lara Montecalvo, and their questioning suggests some optimism for those advocating for the but-for standard.
As discussed here, here, and here, the Circuits are split on whether FCA liability requires that the kickback be the but-for cause of the claim. While the Sixth and Eighth Circuits have held that a but-for showing is required based on the plain language of the AKS, the Third Circuit, giving greater weight to legislative history, has embraced a looser standard and required only a “link” between the alleged kickback and subsequent claim.
In this case, DOJ contend that Regeneron, a drug manufacturer, violated the AKS by subsidizing patients’ copays, through a third-party patient assistance foundation, to induce providers to prescribe the defendant’s drug. According to DOJ, its “matching” analysis linked submitted Medicare claims for the drug to prescriptions subsidized by the patient assistance foundation funded by Regeneron.
In oral argument at the First Circuit, DOJ argued that the AKS’s “resulting from” language requires a causation standard that would render false all claims for items or services that kickbacks were given to induce, not merely the claims that would not otherwise have been submitted but for kickbacks.
DOJ noted that “much about the phrase ‘resulting from’ is undisputed”: the phrase creates a requirement of causation in fact; but-for causation is the default standard of causation in fact; and courts regularly read phrases like “resulting from” to require but-for causation “as long as there is no textual or contextual indication to the contrary.” Yet DOJ argued that from the text “resulting from,” one does not get a but-for standard; rather, one gets “some sort of causal connection.” Indeed, the legislative history surrounding the text supports a standard less demanding than but-for causation. When asked on rebuttal whether there are any historical analogues for DOJ’s proposed standard, DOJ admitted there are none, and that DOJ’s proposal was particular to this provision.
DOJ argued that Paroline v. United States, 572 U.S. 434 (2014) is instructive. There, the Supreme Court examined the context—congressional intent as evidenced by the statutory framework—of a federal restitution statute to conclude that it was appropriate to deviate from the default but-for causation standard. The panel appeared skeptical of this argument, with Judge Kayatta noting that in Paroline, the manifest goal of the statute would have been “essentially eliminated” by enforcing a but-for standard, and questioning whether that was the case with the AKS.
Picking up on that thread, Regeneron emphasized that Paroline was a mandatory restitution case, and applying a but-for standard in cases under the federal restitution statute would have meant that the Government would never have been able to meet its burden. Judge Montecalvo pushed back, inquiring whether, while some causation issues in Paroline would be present in this case, the causal link between a kickback and a claim was difficult to trace just as the harm in Paroline. Regeneron argued that in AKS cases, a but-for causation standard would not be an insurmountable burden for the Government. Indeed, AKS violations may also result in criminal liability. In other words, it is not the case that adopting a but-for standard in determining whether an AKS violation creates FCA liability would render the Government unable to prosecute AKS violations. Regeneron likened DOJ’s proposed standard to little more than “hoped-for correlation,” not causation.
Judge Kayatta asked DOJ for precedent for looking to legislative history, as opposed to the statutory framework as the Supreme Court did in Paroline. DOJ argued that courts should look to the broader context of a statute, including legislative history, the statute as a whole, and the backdrop of caselaw against which Congress has acted, to discern what Congress intended to do. In light of these considerations, DOJ argued, the but-for standard would be “completely at odds” with the case law and the policy of the AKS. After all, prior to the 2010 amendment—which added the “resulting from” language—“it had always been true that claims for the items or services that kickbacks were given to induce were false.”
Judge Kayatta probed DOJ’s position with the hypothetical of a hospital sending a vendor 10,000 claims per year for a product, the vendor paying a kickback to the hospital in an effort to induce more claims, and the hospital sending only 5,000 claims the next year. The First Circuit noted that under DOJ’s theory, even though the number of claims dropped (despite the kickback), all 5,000 of those claims would be false. DOJ argued that this was not a counterintuitive result—in light of the kickback, the decision to use the vendor’s product was not a decision that one can “trust is motivated by the best interest of the patient.” Judge Kayatta indicated that this may be an “odd result” that suggests that but-for causation is appropriate.
We will continue to monitor this case. A recording of the oral argument is 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.
