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.

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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.

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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.

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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.

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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.

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DOJ Reaches Settlement with OraPharma, Inc., Pushing Novel AKS Theory

Earlier this month the U.S. Attorney’s Office for the District of Massachusetts announced a $100,000 FCA settlement resolving novel allegations that a pharmaceutical company violated the Anti-Kickback Statute (“AKS”), and thereby caused the submission of false claims, through incentive compensation payments to its employees for conduct outside the scope of the employee relationship.

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Court Rejects Application of the Public Disclosure Bar Due to DOJ’s Opposition

On January 24, 2023, the United States District Court for the Middle District of Florida denied a  motion to dismiss a qui tam suit premised on Anti-Kickback Statute (“AKS”) allegations, explaining that it could not dismiss the case because DOJ and several interested states had filed oppositions to application of the public disclosure bar.  See United States ex rel. Marcus v. BioTek Labs, LLC, No. 8:18-cv-2915 (M.D. Fla. Jan. 24, 2023).

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Fourth Circuit Underscores the Risk of Commission-Based Compensation Agreements with Independent Contractors

In a recent decision, the Fourth Circuit Court of Appeals for the second time in two years held that commission-based compensation arrangements with independent contractors cannot be safe harbored and do violate the Anti-Kickback Statute and FCA.  See United States ex rel. Nicholson v. Medcom Carolinas, Inc., No. 21-1290 (4th Cir. July 21, 2022).

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