First Circuit Backs But-For Causation Standard in AKS-Based FCA Claims

In Regeneron, the First Circuit tilted the circuit split even more on whether FCA liability requires a kickback to be the but-for cause of a claim based on the 2010 amendment to the AKS. While the Sixth, Eighth, and now First Circuits all hold that the 2010 amendment’s “resulting from” language requires a but-for showing, the Third Circuit, relying primarily on legislative history, requires only a “causal link” between the alleged kickback and subsequent claim. Regeneron simultaneously resolved an intra-circuit split among the district courts in Massachusetts: United States v. Teva Pharmaceuticals USA, Inc., No. CV 20-11548-NMG, 2023 WL 4565105 (D. Mass. July 14, 2023), and United States v. Regeneron Pharmaceuticals, Inc., No. CV 20-11217-FDS, 2023 WL 6296393 (D. Mass. Sept. 27, 2023), both issued in 2023, reached opposite conclusions as to the meaning of “resulting from” in an FCA case premised on AKS violations. The First Circuit granted interlocutory review of both decisions and heard oral argument in Regeneron in July 2024. The Department of Justice announced its settlement with Teva in October 2024.

We have been tracking the development of this issue and have briefed it extensively on behalf of our clients before a wide array of courts.

THE CASE

In this case, the government alleged that Regeneron Pharmaceuticals, a drug manufacturer, violated the AKS by knowingly inducing prescriptions of a drug called Eylea by funding copays for certain patients who received the drug. The government argued that when providers submitted Medicare claims for Eylea prescribed to patients who received copay assistance funded by Regeneron, those claims “resulted from” a violation of the AKS regardless of whether the claims would have been made absent Regeneron’s copay assistance. The government maintained that those Medicare claims were accordingly “false or fraudulent” for purposes of the FCA.

Conversely, Regeneron argued that a claim only “result[s] from” an AKS violation if it includes “items or services” that would not have been paid for by the government absent the AKS violation – in other words, an AKS violation must be a but-for cause of the alleged false claim. Under this view, if a doctor would have submitted a claim for Eylea anyway, then the subsequent Medicare claim cannot have “result[ed] from” Regeneron’s alleged kickbacks.

THE RULING

After nearly five years of litigation, the First Circuit sided with Regeneron and held that an AKS-based FCA claim for allegations stemming from the 2010 amendment to the AKS (in other words, a claim based on a “resulting from” theory) requires proof that kickbacks directly changed treatment decisions. The unanimous opinion affirming Judge Saylor’s decision below was issued by a three-judge panel of Circuit Judges Montecalvo, Thompson, and Kayatta. Circuit Judge William J. Kayatta Jr. authored the opinion.

In Regeneron, the First Circuit was asked to interpret a 2010 amendment to the AKS which provides that a claim “resulting from” a violation of the AKS constitutes a false claim under the FCA. Tuesday’s opinion noted as a threshold matter that this is a matter of first impression in the First Circuit.

Reviewing the district court’s interpretation of the 2010 amendment’s “resulting from” language de novo, the court first looked at the statutory language at issue. The opinion reasoned that because the phrase “resulting from” has the ordinary meaning of but-for causation, the court may deviate from this “ordinary course” only if the statute in question provides “textual or contextual indications for doing so.” After reviewing the text of the statute, the court found “no language in the 2010 amendment that by itself runs counter to the presumption that ‘resulting from’ calls for proof of but-for causation.”

After establishing that the text of the amendment itself did not “contraindicate[] a but-for causation standard,” the court next evaluated the government’s contextual arguments. After assessing the legislative purpose of the 2010 amendment, the court nonetheless determined that but-for causation was the proper standard, declining to endorse the government’s view that interpretation of the AKS in the civil context must track the kickback law’s criminal provisions, which do not require proof that reimbursement would not have occurred absent illegal kickbacks. The First Circuit observed that “the criminal provisions of the AKS serve a different purpose than the provisions linking an AKS violation to FCA falsity” and therefore it “makes sense for the 2010 amendment to render a claim false for FCA purposes only when a kickback is the cause of that claim’s submission to the government.”

The First Circuit also disagreed with the government’s argument that the statutory history counseled against requiring proof of causation to demonstrate falsity under the FCA, instead agreeing with other circuits that have found that “the 2010 amendment did not disturb alternative theories of FCA liability (e.g., false certification)” and stating that “[p]ut simply, claims under the 2010 amendment run on a separate track than do claims under a false-certification theory.”

Finding “no convincing ‘textual or contextual’ reason to deviate from the default presumption that the phrase ‘resulting from’ as used in the 2010 amendment imposes a but-for causation standard,” the First Circuit held that “to demonstrate falsity under the 2010 amendment, the government must show that an illicit kickback was the but-for cause of a submitted claim.”

KEY TAKEAWAYS

By adopting the “but-for” causation standard in AKS-based FCA claims on a “resulting from” theory, the First Circuit now requires plaintiffs in these cases to show that claims submitted to Medicare would not have occurred but for an illegal kickback.

While this case delivered a victory to drug manufacturers overall by adopting a pragmatic interpretation of the AKS, which is often used as a basis for FCA claims, the issue of causation in AKS-based FCA claims is far from settled. FCA litigants should be mindful of the binding precedent in their home circuits, and those without controlling caselaw in their circuit should carefully monitor developments in other courts. This issue is ripe for review by the Supreme Court, and eyes will be on SCOTUS to weigh in.

In short, entities with possible FCA exposure should track this issue carefully, and those with pending cases should review their litigation strategy to account for this development. In particular, and whenever applicable, defendants in FCA actions should raise – or preserve – the argument as to the “but-for” causation standard in “resulting from” cases. We continue to monitor and assess this changing landscape and implications for our clients.