D.C. Circuit Issues Major Decision On Anti-Kickback Statute, Beneficiary Inducement Statute, And OIG Advisory Opinion Deadlines

Key Takeaways

• The D.C. Circuit adopted broad, ordinary meanings of “induce” and “remuneration” under the Anti-Kickback Statute, joining the Second and Fourth Circuits in rejecting narrower, corruption-focused interpretations.
• The court held that OIG’s analysis of Vertex’s Fertility Support Program under the Beneficiary Inducement Statute was arbitrary and capricious because the agency failed to meaningfully explain why the Promotes Access to Care exception did not apply.
• The court struck down OIG’s advisory opinion timing regulations, making the statutory 60-day deadline enforceable from the date OIG receives a request, not from formal acceptance, and limiting OIG’s ability to toll the deadline.

On September 4, the U.S. Court of Appeals for the D.C. Circuit issued a significant decision in Vertex Pharmaceuticals Inc. v. U.S. Department of Health and Human Services, addressing the scope of the federal Anti-Kickback Statute (AKS), the Beneficiary Inducement Statute (BIS), and the enforceability of statutory deadlines for advisory opinions issued by the U.S. Department of Health and Human Services Office of Inspector General (OIG).

The court broadly construed “induce” and “remuneration” under the AKS, holding that they carry their ordinary, expansive meanings and joining the Second and Fourth Circuits in rejecting a narrower, corruption-focused reading. But it reversed OIG’s determination that Vertex’s Fertility Support Program violated the BIS, finding the agency’s analysis arbitrary and capricious because it failed to engage meaningfully with the Promotes Access to Care exception. And, in what is likely the decision’s most consequential aspect, the court struck down OIG’s advisory opinion timing regulations, making the statutory 60-day deadline for advisory opinions enforceable from receipt of a request rather than formal acceptance or after tolling.

Background

Vertex Pharmaceuticals developed Casgevy, a groundbreaking gene therapy approved to treat sickle cell disease and transfusion-dependent beta-thalassemia. Casgevy’s treatment protocol requires patients to undergo intensive chemotherapy conditioning, which can impair fertility. Recognizing this side effect as a serious barrier to patient uptake, Vertex created a Fertility Support Program offering up to $70,000 per patient for fertility preservation services, such as egg or sperm cryopreservation, prior to treatment.

The Fertility Support Program was initially available only to privately insured patients. Seeking to extend the program to federally insured patients—including those covered by Medicare, Medicaid, and TRICARE—Vertex requested an advisory opinion from OIG on June 13, 2023.

OIG is authorized to issue advisory opinions regarding whether actual or proposed arrangements implicate the AKS or the BIS. The governing statute requires OIG to issue such opinions within 60 days of receiving the request. OIG regulations, however, include two mechanisms that effectively extend this deadline: (1) a provision allowing up to 10 business days for “formal acceptance” of a request before the 60-day clock begins running, and (2) tolling provisions that pause the 60-day period when OIG requests additional information or awaits outside expert consultation.

Despite the statutory 60-day deadline, OIG did not issue its advisory opinion until July 18, 2024—more than 13 months after Vertex’s request. OIG issued an unfavorable opinion under both the AKS and the BIS. Vertex challenged the advisory opinion in the U.S. District Court for the District of Columbia and separately challenged the regulations extending the 60-day deadline. The district court granted summary judgment for OIG on all claims. Vertex appealed to the D.C. Circuit.

The Court’s Decision

A three-judge panel of the D.C. Circuit affirmed in part, reversed in part, and remanded the case. The court’s analysis addressed three principal issues.

1. The Anti-Kickback Statute: Broad Ordinary Meanings of “Induce” and “Remuneration”

The court affirmed OIG’s conclusion that Vertex’s Fertility Support Program constitutes an arrangement that could violate the AKS. The court’s analysis focused on two key statutory terms: “induce” and “remuneration.”

Vertex argued that “induce” should be interpreted narrowly, akin to the criminal law concepts of solicitation or facilitation. The court rejected this argument, holding that “induce” in the AKS means “to influence or prevail on a person”—its ordinary dictionary meaning. The court distinguished the Supreme Court’s interpretation of “induce” in United States v. Hansen, which involved inducing unlawful activity (illegal immigration). Because the AKS addresses inducing lawful activity (selecting federal healthcare services), the narrower Hansen meaning was inapt. The court further reasoned that a narrow reading of “induce” would render the AKS’s extensive safe harbors largely superfluous.

Vertex also contended that “remuneration” should be limited to corrupt transactions such as kickbacks and bribes. In support of its position, Vertex pointed to the parenthetical language that follows the word in the statute—“(including any kickback, bribe, or rebate)”—as qualifying or limiting language. The court disagreed, holding that “remuneration” carries its ordinary, expansive meaning and encompasses anything of value, including payments or services below fair market value. The statutory parenthetical is illustrative, not exhaustive. The court noted that “rebate” is an ordinary commercial term with no inherently corrupt connotation, confirming that Congress did not intend to limit “remuneration” to corrupt payments.

2. The Beneficiary Inducement Statute: OIG Failed to Engage with the Promotes Access to Care Exception

While the court affirmed OIG’s conclusion on the AKS, it held that OIG’s BIS analysis on the Fertility Support Program was arbitrary and capricious.

The BIS includes a “Promotes Access to Care” exception, which exempts from the statute’s reach certain remuneration that promotes access to care and poses a low risk of harm to patients or federal healthcare programs. Vertex had presented evidence that the Fertility Support Program satisfied this exception, including studies demonstrating that fertility concerns deter patients from pursuing Casgevy treatment, evidence that patients lack the financial means for fertility preservation, and Centers for Medicare & Medicaid Services guidance recognizing fertility preservation as a significant access barrier for gene therapies requiring chemotherapy conditioning.

OIG’s advisory opinion addressed the exception in a conclusory paragraph, stating only that it “lack[ed] data” to evaluate the exception. The court found this inadequate, noting that OIG failed to explain what data it lacked, why it could not obtain the missing data, or why Vertex’s evidentiary submission was insufficient. The court emphasized that “[c]onclusory explanations for matters involving a central factual dispute where there is considerable evidence in conflict do not suffice” under the arbitrary and capricious standard.

3. Advisory Opinion Timing Regulations: The 60-Day Statutory Deadline Cannot Be Extended by Regulation

In perhaps the most broadly impactful portion of its decision, the court reversed the district court’s ruling on the validity of OIG’s timing regulations for advisory opinions.

The court found that the statute unambiguously requires OIG to issue advisory opinions within 60 days of “receiving” a request. OIG’s regulations violate this mandate in two ways: First, the court held that regulations allowing up to 10 business days for “formal acceptance” of a request before the 60-day period begins are contrary to the statute, which starts the clock upon “receipt,” not upon a discretionary acceptance determination. Second, the court held that regulations permitting tolling of the 60-day period when the agency requests additional information or awaits outside expert advice likewise are unlawful.

Practical Implications of the Vertex Decision

The practical implications of the D.C. Circuit’s decision extend well beyond the Fertility Support Program and similar initiatives. Each of the court’s holdings has important ramifications for industry stakeholders and for agency practice.

First, the decision confirms the broad reach of two key terms in the AKS: “induce” means to influence or prevail on a person (not its specialized criminal law meaning, even though the AKS is a criminal statute), and “remuneration” includes anything of value (not merely corrupt kickbacks or bribes). In this respect, the D.C. Circuit joins the Second Circuit (United States v. Pfizer, Inc.) and the Fourth Circuit (Pharmaceutical Coalition for Patient Access v. United States), solidifying a multi-circuit consensus on these issues.

At the same time, it is important to bear in mind the context of this case. An AKS violation requires a showing that a party acted “knowingly and willfully.” In the context of an advisory opinion request, like that made by Vertex, OIG does not opine on whether the requisite intent is present. Courts like the Second Circuit in U.S. ex rel. Hart v. McKesson have held that willfulness requires proof of a “bad purpose,” meaning “with knowledge that [the] conduct was unlawful.” The willfulness element—not the “induce” or “remuneration” element—does some of the work of separating benign conduct from criminal acts under the AKS. In other words, the D.C. Circuit’s broad reading of “induce” and “remuneration” occurred in a context in which intent was not at issue, but intent remains an essential element of any AKS violation.

Second, the BIS ruling is an important check on OIG. When a requestor presents substantial evidence that an arrangement satisfies a statutory exception, OIG must engage with that evidence and explain its conclusion rather than rely on a conclusory denial. Yet, OIG is at an information disadvantage in the advisory opinion context. Requestors both frame the issue and provide the information they deem relevant and necessary for OIG to issue an opinion. That leaves OIG with only the information the requestor provides, occasionally supplemented by publicly available information, to consider when evaluating the arrangement. This dynamic, coupled with the elimination of OIG’s ability to toll the 60-day clock, as described below, may lead OIG to reject more requests at the outset.

Third, the 60-day timeline ruling will require OIG to revisit the advisory opinion process. The D.C. Circuit ruling means OIG can no longer impose a formal acceptance period or stop the clock while it gathers additional information. OIG may manage the deadline by imposing stricter requirements for what qualifies as a “request,” allowing it to reject inadequate submissions at the outset. And, where information is lacking, OIG may issue an unfavorable opinion rather than request additional information. But, again, there are limits. If a submission qualifies as a request, the clock starts on day one. And the BIS ruling checks OIG’s ability to issue cursory unfavorable opinions: OIG must grapple with the evidence or explain why it is inadequate.

Lastly, the decision may provide a framework for asking whether OIG’s implementation choices exceed its statutory authority, both within and outside of the advisory opinion context. The court’s willingness to set aside longstanding regulations that conflict with the statutory text, and to require reasoned engagement with statutory exceptions, suggests that other areas in which OIG has added requirements or narrowed protections through regulation or subregulatory guidance may be similarly vulnerable to challenge, particularly in the post-Loper Bright landscape.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.