First Circuit Poised to Consider Anti-Kickback Statute’s Causation Element in FCA Cases, Take a Position on Circuit Split
June 27, 2024 – Articles
Conflicting interpretations of the causation standard in two AKS-predicated False Claims Act cases in the District of Massachusetts, Teva and Regeneron, mirrored the circuit split on the issue and led to interlocutory appeals before the First Circuit. The court’s eventual decision could have a major impact on the national landscape around this high-stakes question. By joining the Eighth and Sixth Circuits, the First Circuit would solidify a 3–1 majority around “but for” causation, while following the Third Circuit’s more relaxed “link” rule would knot the circuits at 2–2. Oral argument is scheduled for July.
The First Circuit is poised to decide a prominent question in False Claims Act (FCA)[1] litigation: the causation standard for FCA claims predicated on Anti-Kickback Statute (AKS)[2] violations. Twin interlocutory appeals were brought before the court from conflicting summary judgment rulings in the District of Massachusetts, in United States v. Teva Pharmaceuticals USA, Inc.[3] and United States v. Regeneron Pharmaceuticals, Inc.,[4] mirroring a circuit split. While the Teva appeal has just been placed in abeyance to allow for settlement negotiations,[5] the Regeneron appeal remains active and will require the court to take a position on the issue.
An AKS-predicated FCA action must show the defendant sought government payments for “items or services resulting from” the AKS violation.[6] The Eighth and Sixth Circuits interpret “resulting from” to mean “but for” causation[7]—i.e., the claim for payment “would not have [been presented] in the absence of—that is, but for” the alleged kickback.[8] The Third Circuit merely requires plaintiffs to show “a link” between the AKS violation and presentment of a payment claim.[9] The district courts’ opposing decisions mirror the circuit split, with Teva applying the Third Circuit’s laxer standard and Regeneron following the stricter test of the Eighth and Sixth. Given the radically different hurdles plaintiffs face under the respective tests and the volume of AKS-based FCA lawsuits, the First Circuit’s decision will likely be significant.
The circuit split
The “link” or “exposure” test. In U.S. ex rel. Greenfield v. Medco Health Solutions, Inc., the Third Circuit reversed the district court’s summary judgment grant to defendants, finding it “too exacting” to require plaintiffs to prove “federal beneficiaries would not have used the relevant services absent the alleged kickback scheme.”[10] Instead, it held the AKS’s “resulting from” language only requires plaintiffs to prove “a link”—that a patient was “exposed to an illegal recommendation or referral” and a provider subsequently submitted a reimbursement claim “pertaining to that patient.”[11] However, the court rejected the relator’s proposed “taint” standard.[12]
Implying that the statutory phrase “resulting from” is “arguably not plain,”[13] the court turned directly to legislative history, rejecting “but for” causation as undermining the AKS drafters’ “inten[t] to strengthen” the government’s ability to fight Medicare fraud.[14] The court found it “incongruous” that an AKS criminal conviction would not also trigger civil liability under the FCA, even absent proof of direct causation.[15] The “relative[] difficult[y]” of proving Medicare fraud, in the court’s view, “counsels requiring something less than proof that the underlying medical care would not have been provided but for a kickback.”[16]
“But for” causation. Four years after Greenfield, the Eighth Circuit held in Cairns v. D.S. Medical LLC that the “resulting from” requirement meant proving “defendant[s] would not have included particular items or services but for the illegal kickbacks.”[17] The court approached the issue as one of statutory interpretation: when “a statute is unambiguous, interpretation both begins and ends with the text.”[18] Unlike the Third Circuit, the Eighth Circuit found the meaning of “resulting from” plain, essentially identical to “results from” in the Controlled Substances Act—where “but for” causation is required.[19] More broadly, “but for” causation is the “default” or “background” common law rule against which Congress legislates. Absent contrary textual indications, the court declined to wade into legislative history in a quest to divine “the drafters’ intentions.”[20] The following year, the Sixth Circuit followed suit in U.S. ex rel. Martin v. Hathaway, reasoning along similar lines to Cairns and likewise concluding that the statute’s “resulting from” phrasing dictates “an ‘unambiguously causal’ standard.”[21] The court stressed that Congress could have articulated a less stringent causation test, such as “provided in violation of,” but did not choose do so.[22]
Dueling district court holdings
In August of 2023, U.S. District Judge Nathaniel M. Gorton applied the Third Circuit’s “link” test in Teva, granting summary judgment to the government (and denying it to defendant) on causation.[23] In Teva, the government alleged the defendant, a manufacturer of multiple sclerosis medication, illegally subsidized Medicare co-pays through contributions to a foundation—payments the government characterized as kickbacks meant to promote prescriptions of defendant’s drug.[24] The government further alleged the payments led to the filing of false Medicare reimbursement claims.[25]
Regarding causation, the court relied on Guilfoile v. Shields, where the First Circuit stated that “if there is a sufficient causal connection between an AKS violation and a claim submitted to the federal government, that claim is false within the meaning of the FCA.”[26] However, the court did not explicitly address what would make a causal connection “sufficient”; indeed, it went on to state merely that the government “must prove a ‘causal connection’” between defendant’s “contributions” to the foundations “and the resulting . . . claims that Medicare reimbursed.”[27] Nor did the court explain its reasons for rejecting the “but for” test,[28] or discuss or even mention Cairns and Martin.[29]
Two months later, Chief U.S. District Judge F. Dennis Saylor, performing a detailed statutory analysis in Regeneron,[30] endorsed the majority “but for” standard[31] and denied the government summary judgment as to causation.[32] In Regeneron, the defendant eye medication manufacturer made payments to a charity that helps cover needy patients’ drug co-pays.[33] The government alleged the payments were made to boost defendant’s drug sales.[34] Causation became key: even if the payments violated the AKS, did they actually cause submission of false Medicare reimbursement claims, triggering FCA liability?[35] To answer this, the district court had to scrutinize the unsettled meaning of the statutory phrase “resulting from.”[36]
The court found Greenfield’s reasoning unpersuasive,[37] underscoring the absence there of textual analysis of the phrase “resulting from” or an examination of its use in other statutory contexts, in favor of exploring legislative history.[38] Instead, the court endorsed the Eighth Circuit’s view in Cairns that where a statutory text is “unambiguous,” “interpretation both begins and ends with the text.”[39] The court found Greenfield’s “link” or “exposure” standard to be “fraught with problems,”[40] noting that the meaning of “exposure” is neither “set forth in the statute” nor “part of a familiar common-law framework,” and is therefore unclear.[41]
Ultimately, the court found Cairns and Martin persuasive, agreeing that Congress’s adoption of “the ‘resulting from’ language in the statute requires a finding that the appropriate standard is but-for causation.”[42] And while meeting that standard is harder than merely showing a “link,” the court noted it is not unreachable—circumstantial evidence, reasonable inferences, temporal proximity, and other forms of evidence can all help clear the preponderance hurdle and demonstrate causation.[43]
Appeal to First Circuit
Teva was certified for interlocutory appeal on defendant's motion, which pointed to the active circuit split and the possibility of a contradictory holding in Regeneron (then pending).[44] Subsequently, after his contrary decision in Regeneron,[45] Chief Judge Saylor sua sponte certified an interlocutory appeal in that case,[46] observing that the “split between the two judges of this court reflects a split in the circuits,” making the issue one “of national importance.”[47] Notably, the defendant supported interlocutory review even though it had won summary judgment on the issue.[48]
The First Circuit accepted the appeals and set joint oral argument (now in Regeneron only) for July 22, 2024. In briefing, defendants have anchored their argument for the “but for” test in the plain meaning of the statute’s causation language,[49] while the government has characterized the “but for” standard as a mere “default” rule[50] which can be overcome by contrary “textual or contextual indication.”[51]
The interlocutory appeal will be closely watched. If the First Circuit endorses the “but for” standard, that view would enjoy a strengthened, 3–1, majority, while an opposite decision would even up the circuit split and increase the chances of eventual Supreme Court consideration. Dinsmore’s FCA Team will monitor the litigation and keep our clients and interested readers posted.
[1] The False Claims Act is codified at 31 U.S.C. § 3729 et seq.
[2] The Anti-Kickback Statute (full title: The Medicare and Medicaid Anti-Kickback Statute) is codified at 42 U.S.C. § 1320a-7b. For simplicity, this article will refer exclusively to Medicare claims.
[3] 682 F. Supp. 3d 142 (D. Mass. July 14, 2023); the interlocutory appeal is docketed under No. 23-1958 at the First Circuit.
[4] Civ. A. No. 20-11217-FDS, 2023 U.S. Dist. LEXIS 172618 (D. Mass. Sept. 27, 2023); the interlocutory appeal is docketed under No. 23-2086 at the First Circuit.
[5] See Teva, No. 23-1958 (1st Cir.), Appellant’s Mot. to Hold Appeal in Abeyance (June 16, 2024); Order (June 20, 2024) (granting abeyance motion). It is unclear whether, or how, any eventual settlement of Teva might affect the Regeneron appeal; while the specter of two trials moving forward under conflicting legal standards would no longer be present, the government as appellant in Regeneron evidently retains an interest in challenging the “but for” standard adopted by the district court in that case.
[6] 42 U.S.C. § 1320a-7b(g) (emphasis added). The AKS makes it a felony to offer or pay “any kickback, bribe, [] rebate,” or other “remuneration” to induce a person to purchase any good or service “for which payment may be made . . . under a Federal health care program[.]” § 1320a-7b(b)(2) (alteration added). The FCA liability provision, 42 U.S.C. § 1320a-7b(g), was added to the AKS via amendment in 2010, as part of the Affordable Care Act. See Regeneron, 2023 U.S. Dist. LEXIS 172618, at *8.
[7] See U.S. ex rel. Cairns v. D.S. Med. LLC, 42 F.4th 828, 834–36 (8th Cir. 2022); U.S. ex rel. Martin v. Hathaway, 63 F.4th 1043, 1052–55 (6th Cir. 2023).
[8] Cf. Cairns, 42 F.4th at 834 (quoting Burrage v. United States, 571 U.S. 204, 213 (2014)) (alteration added).
[9] See U.S. ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d 89, 100 (3d Cir. 2018).
[10] Id. The relator alleged the defendant, a specialty pharmacy, made payments to two charities that allegedly recommended the defendant as a provider and falsely certified its AKS compliance in filing Medicare reimbursement claims. Id. at 91–92. The district court found the relator failed to show the Medicare claims occurred “as a result” of the alleged AKS violations, and granted summary judgment for the defendants. Id. at 93. The relator appealed, arguing it was error to require him to prove “a direct link between the alleged kickback scheme and each false claim.” Id.
[11] Id. at 100 (emphasis added); see also id. at 98 (“[Relator] does not need to prove [the] referrals actually caused their members to use a particular healthcare provider. . . . For a[n] [FCA] violation, [relator] must prove that at least one of [defendant’s] claims sought reimbursement for medical care that was provided in violation of the [AKS] (as a kickback renders a subsequent claim ineligible for payment).”).
[12] Id. at 100 (noting relator’s insistence that “the taint of a kickback renders every reimbursement claim false” but rejecting notion that a kickback automatically “morph[s] into a false claim”); see also id. at 97 (quoting U.S. ex rel. Wilkins, 659 F.3d 295, 314 (3d Cir. 2011)) (holding AKS violations are false claims because “[t]he Government does not get what it bargained for when a defendant is paid . . . for services tainted by a kickback”) (alteration in Wilkins) (omission in Greenfield).
[13] Id. at 95.
[14] Id. at 96 (citing H.R. Rep. No. 95-393, at 1 (1977)) (internal quotation omitted) (alteration added); see also id. (noting it “appears the drafters of the [AKS] intended” to bolster enforcement and prosecution of Medicare fraud).
[15] Id. (citing Gov’t Amicus Br. at 22). The different nature of the two statutes, including the lack of a presentment requirement under the AKS, underlies the difficulty courts have had in establishing the causation element for AKS-predicated FCA claims. And, while it is true that the FCA is a civil statute, courts have long recognized that the FCA’s treble damages and whistleblower enforcement provisions give the statute a hybrid, “quasi-criminal,” character. See, e.g., U.S. ex rel. Grant v. United Airlines, Inc., 912 F.3d 190, 197 (4th Cir. 2018) (with reference to the Rule 9(b) particularity requirement).
[16] U.S. ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d 89, 96 (3d Cir. 2019).
[17] 42 F.4th 828, 831, 836 (8th Cir. 2022) (internal quotation marks omitted) (emphasis added)). Cairns reversed the district court’s judgment of treble FCA damages after a jury found liability based on a surgeon’s acceptance of kickbacks from the manufacturer of spinal implants the surgeon purchased; the appeals court found the district court’s jury instructions misstated the causation standard by only requiring that a Medicare claim “failed to disclose the [AKS] violation.” Id. at 834.
[18] Id. at 834 (citing Food Mktg. Inst. v. Argus Leader Media, 139 S. Ct. 2356, 2364 (2019)); see also id. at 836 (noting that the Third Circuit in Greenfield “adopted an approach that we have . . . rejected: relying on legislative history and ‘the drafters’ intentions’ to interpret the statute”). The court also stated pointedly that “[s]tarting with legislative history and purpose [] is no way to read a statute.” See id. at 836 (citing Food Mktg. Inst., 139 S. Ct. at 2364) (omission added).
[19] Id. at 834 (citing Burrage v. United States, 571 U.S. 204, 210–11, 219 (2014)); see also id. at 836 (citations omitted) (noting that Congress could have used different causal language, such as “tainted by” or “provided in violation of” but did not, and “it is [the court’s] job to interpret Congress’s actual words”). The court also found, more broadly, that “but for” causation is the “default” or “background” common law rule against which Congress legislates. Id. (quoting Comcast Corp. v. Nat’l Ass’n of Afr. Am.-Owned Media, 140 S. Ct. 1009, 1014 (2020)).
[20] Id. at 836.
[21] 63 F.4th 1043, 1052–53 (6th Cir. 2023) (quoting Cairns, 42 F.4th at 836). Martin affirmed the district court’s dismissal of a qui tam action based on allegations that a hospital’s decision not to hire an ophthalmologist was in return for a purported agreement from an independent ophthalmologist to make continued surgery referrals to the hospital, and therefore violated the AKS. Id. at 1045–48. Besides finding the arrangement was not an illegal scheme under the AKS, the court affirmed on the alternative ground of causation. Id. at 1052–55. The Sixth Circuit, like the Eighth, found “but for” causation to be the “ordinary meaning of ‘resulting from,’” and could discern no “strong ‘textual or contextual indication[s]’” supporting a “contrary” meaning. Id. at 1052 (quoting Burrage, 571 U.S. at 212) (alteration added in Martin).
[22] Id. at 1053 (quoting Cairns, 42 F.4th at 836). The Sixth Circuit also took issue with the legislative history approach on the ground that the AKC is “a statute with criminal applications.” Id. at 1054 (quoting United States v. R.L.C., 503 U.S. 291, 307–10 (1992)) (Scalia, J., concurring)) (“[N]o one should be imprisoned based on a document or statement that never received the full support of Congress and was [not] presented to the president for signature.”) (alteration added).
[23] United States v. Teva Pharms. USA, Inc., 682 F. Supp. 3d 142, 145–46, 148 (D. Mass.2023). Teva’s treatment of the causation issue was limited, and did not include any analysis of the circuit split.
[24] Id. at 144–45.
[25] Id. at 143–44.
[26] Id. at 146 (quoting Guilfoile, 913 F.3d 178, 190 (1st Cir. 2019)). Guilfoile, in turn, relied on the Third Circuit’s holding in Greenfield. See 913 F.3d at 190 (citing U.S. ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d 89, 96–98 (3d Cir. 2019)) (endorsing “sufficient causal connection” standard).
[27] See id. (citing Guilfoile, 913 F.3d at 190) (emphasis added).
[28] See id. at 148.
[29] See id. The court did not provide an explanation of what makes a causal connection “sufficient”; the evidence it found sufficient to withstand defendant’s summary judgment motion as to causation included evidence that defendant “intended to induce” drug sales through the contributions, that patients told defendant they needed financial assistance to afford the drug, and that defendant “understood it was profitable to provide co-pay assistance to generate sales.” See id. at *146. While this evidence is manifestly probative of the AKS knowledge element, it is less clear how it can satisfy causation.
[30] 2023 U.S. Dist. LEXIS 172618, at *19, 21–35.
[31] Id. at *31.
[32] Id. at *38–39.
[33] Id. at *2.
[34] Id.
[35] Id. at *2–3. In arguing the donations caused no false claims, defendant asserted that a majority of the patients who purchased defendant’s drug were allocated their funding from the charity before defendant made a single donation, and the charity had sufficient funds to cover all copay support to the patients in question for two entire years even without any donation from the defendant. Id. at *3. The defendant also contended it was not the only donor for a significant portion of the relevant time period, and that the charity’s co-pay assistance was awarded first-come, first-served and regardless of which medications patients used. Id.
[36] Id. at *19 (quoting U.S. ex rel. Fitzer v. Allergan, Inc., Civ. No. 1:17-cv-00668-SAG, 2022 U.S. Dist. LEXIS 50863, at *25 (D. Md. Mar. 22, 2022)) (“Courts around the country have struggled to define the standard of causation that is required to prove an FCA claim based on an AKS violation.”). The district court also identified two additional questions as unsettled: “the nature and amount of the evidence that the government must present to prove the causal connection” and “the extent to which the defendant can offer countervailing evidence of a lack of causation.” Id. at *19–20.
[37] Id. at *27–31. As a threshold matter, the district court analyzed and rejected the government’s argument that Greenfield was binding on the court because the First Circuit relied on it in Guilfoile v. Shields. Id. at *20 (quoting Guilfoile, 913 F.3d 178, 190 (1st Cir. 2019)) (“[T]he First Circuit cited [Greenfield] in Guilfoile for the proposition that there must be ‘a sufficient causal connection’ between the violation and the submitted claim.”) (alterations added). The district court concluded it was not bound by Greenfield, reasoning that, while the First Circuit relied on it in Guilfoile, that opinion did not delve into Greenfield’s causation analysis because the issue before the Guilfoile court was the pleading standard for an FCA retaliation claim; that Guilfoile “did not elaborate on what it meant by a ‘sufficient causal connection,’” and that Guilfoile “expressly disclaimed making any decision on the ‘full implications’ of the statute.’” See id.
[38] Id. at *22.
[39] Id. at *23 (quoting United States ex rel. Cairns v. D.S. Med. LLC, 42 F.4th 828, 834 (8th Cir. 2022)).
[40] Id. at *27.
[41] Id. The court also noted Greenfield’s failure to demarcate between what constitutes a mere “taint” (insufficient to create liability) as opposed to “exposure” (creates liability) in relation to alleged kickbacks. Id. at *27–29; see also supra n.11 and accompanying text (“taint” theory of causation). The court also expressed concern that the Third Circuit’s standard renders prescribing physician (and patient) intent irrelevant—meaning a defendant could never put on exculpatory evidence of intent, and proving a “link” would “become[] akin to an irrebuttable presumption” leading to liability “even if the facts show no actual causation of any kind.” See id. at *30–31; see also id. at *31 n.14 (citing U.S. ex rel. Flanagan v. Fresenius Med. Care Holdings, Inc., No. 21-11627-FDS, 2022 U.S. Dist. LEXIS 218302, at *52 (D. Mass. Dec. 5, 2022)) (imagining a hypothetical burden-shifting framework regarding causation, with plaintiff’s prima facie showing followed by burden shift to defendant to prove the contrary).
[42] Id. at *31.
[43] Id. at *32–33.
[44] Teva, Civ. A. No. 20-11548-NMG (D. Mass.), DE 196 (July 26, 2023); see also DE 235 (Aug. 14, 2023) (grant of motion for certification of interlocutory appeal). Defendant’s brief noted that, at the end of 2022 in Flanagan, Chief Judge Saylor had hinted (without deciding) that AKS-predicated FCA claims likely required proof of “but for” causation. See DE 198 (July 26, 2023) at 7–8 (citing Flanagan, 2022 U.S. Dist. LEXIS 218302, at *51–52).
[45] 2023 U.S. Dist. LEXIS 172618.
[46] Regeneron, 2023 U.S. Dist. LEXIS 191418, at *2 (D. Mass. Oct. 25, 2023) (certifying interlocutory appeal of causation standard to First Circuit).
[47] Id. at *3–4. Chief Judge Saylor also observed that if both Regeneron and Teva proceed to trial, “at least one of those trials would employ an incorrect causation standard.” Id. at *3.
[48] Regeneron, Civ. A. No. 20-11217-FDS (D. Mass.), Defendant’s Submission Regarding Certification Pursuant to 28 U.S.C. § 1292(b), DE 360, at 1 (Oct. 10, 2023) (“[Defendant] previously indicated that the issue (and order) would be appropriate for interlocutory review no matter which way the Court ruled . . . .”).
[49] Teva, No. 23-1958 (1st Cir.), Appellant’s Br., at 16–19 (Feb. 26, 2024).
[50] Regeneron, No. 23-2086 (1st Cir.), Appellant’s Br., at 20 (Apr. 3, 2024) (quoting Paroline v. United States, 572 U.S. 434, 458 (2014)).
[51] Id. (quoting Burrage v. United States, 571 U.S. 204, 212 (2014)).