United States: Temporal Proximity Is Not Enough: Third Circuit Nixes FCA/Anti-Kickback Suit For Failure To Link Alleged Scheme To Claims

On January 19, 2018, the United States Court of Appeals for the Third Circuit affirmed a district court's ruling granting summary judgment to a specialty pharmacy that was accused of violating the Anti-Kickback Statute and the federal False Claims Act (United States ex rel. Greenfield v. Medco Health Solutions, Inc. et al., No. 17-1152.). The court held that the relator, a former vice president of the specialty pharmacy, failed to link the pharmacy's alleged kickback scheme to the actual submission of claims to Medicare. The decision is important because it stands for the proposition that to be liable under the False Claims Act a relator must allege more than the defendant was submitting claims for federal health care program beneficiaries while engaging in kickbacks. Rather, it must allege that at least one claim was submitted for services that were provided in violation of the Anti-Kickback Statute.

The specialty pharmacy at issue delivered clotting therapies (known as clotting factors) to hemophilia patients. The pharmacy was also active in the philanthropic space, donating to various charities, including Hemophilia Services, Inc. (HSI) and Hemophilia Association of New Jersey (HANJ). The pharmacy donated several hundred thousand dollars to HSI and HANJ between 2007 and 2012.

Among other things, HANJ identified the pharmacy as an HSI-approved vendor on its website and encouraged its users to "remember to work with our HSI providers." HSI and HANJ complained, however, when in 2010 the pharmacy reduced its donations. As a result, the pharmacy asked an area vice president (the relator) to analyze potential return on investment if it were to increase its donations back to earlier levels. The vice president asserted that absent an increase in donations, it would lose "100% of the margin" associated with patients who left the pharmacy. Accordingly, the pharmacy resumed its donations at its earlier levels.

The relator filed suit against the pharmacy, alleging it violated the False Claims Act by falsely certifying it complied with the Anti-Kickback Statute. The government declined to intervene. The case proceeded to summary judgment and the district court ruled in the pharmacy's favor. The district court explained that, even if it was to assume an Anti-Kickback Statute violation, the relator failed to show that the kickbacks caused the charities' referrals, or that those referrals caused patients to decide to use the pharmacy's services. "Absent some evidence . . . that those patients chose [the specialty pharmacy] because of its donations to HANJ/HSI," the relator could not carry his burden on summary judgment. Slip op. at 8. The relator appealed.

On appeal, the Third Circuit acknowledged that the Anti-Kickback Statute, as amended by the 2010 Patient Protection and Affordable Care Act, provides that "a claim that includes items or services resulting from a violation of [the Anti-Kickback Statute] constitutes a false or fraudulent claim for purposes of [the False Claims Act]." 42 U.S.C. § 1320a-7b(g). It also acknowledged that a relator need not show that a kickback directly influenced a patient's decision to use a particular medical provider. Slip op. at 15-16. Nevertheless, the court held that "a 'link' is required." Id. at 18.

The court went on to expressly reject the relator's argument that the pharmacy violated the False Claims Act by contributing to HSI and HANJ, who in turn recommended the pharmacy as an approved provider for HSI and HANJ's members, while at the same time submitting reimbursement claims for federally insured patients. The court instead held that a False Claims Act plaintiff must provide "evidence of the actual submission of a false claim" to prevail at summary judgment. Slip op. at 19. In other words, the relator could not merely allege "temporal proximity between [the pharmacy's] alleged kickback plot and the submission of claims for reimbursement." Slip op. at 22. Instead, he must show, at a minimum, that at least one of the patients for whom the pharmacy provided services and submitted reimbursement claims "was exposed to a referral or recommendation of [the pharmacy] by HSI/HANJ in violation of the Anti-Kickback Statute." Id.

Although the opinion fell short of holding that a relator must allege that kickback-tainted referrals "actually caused [patients] to use a particular healthcare provider," it is a victory for healthcare defendants in False Claims Act litigation. The decision requires relators to show some link between the alleged kickbacks and claims for payments—"temporal proximity" is simply insufficient.

We leave you with a few additional notable points from the litigation:

  • Neither the district court nor the Court of Appeals weighed in on whether the defendant's charitable contributions were illegal kickbacks under the Anti-Kickback Statute.
  • Did the federal government come out on top? The federal government filed an amicus brief (in support of neither party), contending that a relator need not show that the kickbacks caused the relevant medical decisions; a claim that seeks payment for medical care not rendered in compliance with the Anti-Kickback Statute is "false" within the meaning of the FCA. The court seemed to agree with the government's position, holding that a connection is required, but a causal connection is not.
  • Critical factual deficiencies may blunt the decision's staying power. The relator could not establish seemingly basic connections between the alleged illegal kickback and claims submitted to Medicare for reimbursement. He failed to demonstrate that any of the pharmacy's federally insured patients were members of HSI/HANJ (and, therefore, recipients of the charities' communications regarding the defendant), that the federally insured patients viewed the approved provider list, or that HSI/HANJ otherwise referred or recommended such patients to the pharmacy.

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