United States: The Growing Causal Divide: But-For Causation In AKS/FCA Actions

In United States v. Regeneron, the District of Massachusetts Court recently joined the Sixth and Eighth Circuits in requiring the government to show a direct tie between kickbacks and referrals that proximately caused claims to federal healthcare programs to prevail in Anti-Kickback Statute (AKS) and False Claims Act (FCA) actions. The District Court's ruling contributes to the growing split between the Third Circuit, which requires a mere causal connection between kickbacks and referrals, and the Sixth and Eighth Circuits, which require but-for causation between the kickback and the federal claim. This split relates to the per se fraud clause added to the AKS in 2010, which provides "a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim" for purposes of the FCA. The specific causal connotation of the language "resulting from" is the core of the debate between circuits.

"But-for" vs. Causal Chain

The Third Circuit currently stands as the sole circuit in finding a violation of AKS and FCA so long as a kickback payment was made anywhere in the causal chain, even if a doctor would have submitted the claim absent the payment. The District of Massachusetts recently joined the Sixth and Eighth Circuits in rejecting this standard as too broad, instead requiring a direct showing of causation wherein the government or relator must show that a claim made to a federal healthcare program would not have been submitted but-for the payment of a kickback specifically related to that claim. This latest ruling is in direct conflict with earlier cases within the First Circuit, further illustrating the split within and among circuits.

Courts contributing to this split are summarized in the case chart below, including the Third, Sixth, and Eighth Circuits.

The District of Massachusetts Approach: A Lens into the Growing Split

The ruling in the District of Massachusetts further illuminates the split shown in the chart above. In United States v. Regeneron, the government brought suit against Regeneron Pharmaceuticals claiming that it funneled money to the Chronic Disease Fund ("CDF"), a charitable organization, to subsidize patient payments for its drug, Eylea. The government alleged that Regeneron made the payments in order to induce physicians to prescribe Eylea at the expense of Medicare. In violation of the AKS and by extension the FCA, the resulting claims to Medicare were tainted kickbacks. In dispute, the court declined to dismiss at the summary judgment phase as the government was able to provide evidence suggesting that providers were influenced by the remuneration structure.

Citing other circuits that faced the same analytical challenges, the court here focused on the language for a false claim that requires a showing "that includes items or services resulting from a violation of [the AKS]" to reach a holding requiring but-for causation. Reaching to precedent, the court determined that it was not bound by the Third Circuit's decision in Greenfield requiring a "sufficient causal connection" merely because the First Circuit cited to it in Guilfoile v. Shields because the First Circuit did not clarify what it meant by that standard, nor did it discuss Greenfield. Going a step further, the court rejected the standard of a "sufficient causal connection" as "divorced from the actual language of the statute and from basic principles of statutory interpretation" as well as "disconnected from long-standing common-law principles of causation." Applying the higher standard of but-for causation, the court held that the government did provide sufficient evidence to withstand summary judgment. However, on October 25, the District Court certified an interlocutory appeal on this portion of the ruling to the First Circuit.

Looking Ahead Amidst Evolving Standards of Causation

Earlier this summer, the Middle District of Florida also joined the Sixth and Eighth Circuits in requiring the government to show a direct tie between kickbacks and referrals which proximately caused claims to federal healthcare programs in AKS and FCA actions in U.S. v. Taneja. The court in Taneja required a showing of but-for causation, a higher burden than the Third Circuit's requirement that a prohibited remuneration fall within the causal chain leading to a claim. In essence, the government argued that the existence of any kickback scheme taints all referrals from that source, regardless of whether payments are made for claims submitted to government or non-government payors. However, the court determined that the government was unable to meet this burden and denied the motion for summary judgment.

As the Supreme Court denied certiorari to the Sixth Circuit's decision in Martin, the split regarding causation deepens. The District Court of Massachusetts certified interlocutory appeals in Regeneron and Teva, though a potential resolution in the First Circuit may still raise this issue before the Supreme Court yet again.

As courts continue to tackle this issue, providers should be mindful of which position courts take in their state or circuit as they face FCA litigation. There are two main groups of cases interpreting the required causal link for summary judgment in FCA and AKS actions, as noted in the case chart above. The first creates a stringent standard, requiring the plaintiff to show the claim would not have been made but-for a payment. The second is more lenient, allowing plaintiffs to prevail so long as they can show a payment was made in the causal chain leading to the claim. With more cases to come, the FCA bar will be looking at how the circuit split develops to understand the burden of proof required in their circuit.

The authors thank McGuireWoods summer associate Zoe Smith for assistance preparing this legal alert. She is not licensed to practice law.

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