District Court Allows Summary Judgment on Medically Unnecessary and AKS Arguments, Joins Conversation on AKS Causation Standard
Judge Patti Saris in the District of Massachusetts recently granted a defense motion for summary judgment after concluding that relator failed to show that defendants knowingly submitted medically unnecessary tests or that any false claims were submitted as a result of independent contractor arrangements that allegedly violate the Anti-Kickback Statute (“AKS”). See U.S. ex rel. Omni Healthcare v. MD Spine Solutions, 18-cv-12558 (D. Mass. Jan. 6, 2025). With the latter ruling, Judge Saris joins a growing majority of courts holding that an AKS violation is only a false claim under the FCA if the claim would not have been submitted but for the kickback.
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.
Seventh Circuit Rejects Constitutional Challenge to FCA Judgment, Recognizes Circuit Split on Causation Requirement for AKS-Based Claims
In a recent decision, the Seventh Circuit acknowledged—but declined to pick sides in—a circuit split regarding the degree of causation required to establish FCA claims premised on AKS violations. In the same opinion, the Seventh Circuit rejected an Eighth Amendment challenge to the amount of an FCA judgment.
Court Cuts False Claims Act Jury Verdict in Half in Rare Constitutional Decision
On Thursday, a Minnesota district court judge more than halved a $490 million False Claims Act jury verdict against an ophthalmology distributor and its founder for Anti-Kickback Statute (“AKS”) violations, to $217 million, holding the damages were “notably severe” and “grossly disproportional” to the offense, and thus improper under the Excessive Fines Clause.
Court Requires But-For Causation for AKS-FCA Violations But Highlights Potential Defense Challenges from the Supervalu Decision
A recent decision from the District of Minnesota applying the Eighth Circuit’s new but-for causation requirement for connecting violations of the Anti-Kickback Statute (AKS) to FCA violations emphasizes the importance of the circuit split over the correct causation standard, while also highlighting challenges defendants can face post-Supervalu, particularly at the motion to dismiss stage, when arguing that their intent was inconsistent with the FCA’s scienter element. See United States ex rel. Louderback v. Sunovian Pharmaceuticals, Inc., No. 17-cv-1719 (D. Minn. Nov. 27, 2023). (more…)
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.
District of Massachusetts Adopts But-For Causation Test for FCA Claims Premised on AKS Violations
On September 27, 2023, the District of Massachusetts, assessing the causation standard linking Anti-Kickback Statute violations to FCA liability, determined 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. We have previously written about the circuit split on this issue here and here. We will follow up with an additional post describing the court’s opinion, available here, in greater detail.
Court Certifies Interlocutory Appeal to First Circuit on Causation Standard Connecting AKS Violations and the FCA
Last week a court in the District of Massachusetts took the rare step of allowing an FCA defendant to pursue an interlocutory appeal arising from the summary judgment stage of an FCA case in which DOJ is seeking $10 billion in damages and penalties. The question on appeal asks the First Circuit to take a side in an expanding circuit split on the requisite causation requirement for AKS violations to trigger FCA liability.
DOJ Reaches Settlement with Laboratory Over Commission-Based Compensation Arrangements with Independent Contractors, Medical Necessity
Earlier this month, the U.S. Department of Justice (“DOJ”) announced a $5.9 million FCA settlement resolving allegations that Genotox Laboratories Ltd., a toxicology and pharmacogenetics testing laboratory: 1) violated the Anti-Kickback Statute (“AKS”), and thereby caused the submission of false claims, through commission-based compensation arrangements with its independent contractors, and 2) submitted claims to federal healthcare programs for unnecessary drug tests. In parallel proceedings, the U.S. Attorney’s Office for the Western District of Texas and Genotox entered into an eighteen-month Deferred Prosecution Agreement to resolve a criminal investigation into the same conduct. The settlement highlights DOJ’s ongoing interest in pursuing independent contractor arrangements that do not fit within a safe harbor to the AKS, where such relationships are also accompanied by conduct that traditionally attracts enforcement scrutiny, such as submission of claims for medically unnecessary services.
Sixth Circuit Adopts Limited Definition of AKS “Remuneration,” Robust Standard for Causation in AKS Qui Tams
On March 28, 2023, the Sixth Circuit issued a notable decision rejecting broad theories from DOJ and relators about (1) the definition of remuneration under the Anti-Kickback Statute (AKS) and (2) the causation requirement for AKS violations that trigger FCA liability. See United States ex rel. Martin v. Hathaway, No. 22-1463 (6th Cir. 2023). On the first, the court held that “remuneration” under the AKS “covers just payments and other transfers of value,” not “any act that may be valuable to another.” On the second, the court held that FCA liability attaches only if the claim would not have been submitted but for the AKS violation.
