Medicare fraud attorneys want answers from 1st Circuit
Two federal judges in Massachusetts have certified interlocutory appeals asking the 1st Circuit to pick a side on the question of what causation standard applies to Medicare and other health care fraud claims alleging violation of the Anti-Kickback Statute and the False Claims Act.
In U.S. v. Regeneron Pharmaceuticals, Inc., U.S. District Court Chief Judge F. Dennis Saylor IV denied the government’s motion for summary judgment on claims that the defendant improperly funneled millions of dollars to an alleged independent charitable foundation to subsidize patient copays for Eylea, a drug used to treat age-related macular degeneration.
The judge did so in part based on his holding that a “but for” standard of causation applied to those claims and that, under that standard, a fact issue existed as to whether Regeneron’s donations to the charity actually “resulted” in false claims within the meaning of the applicable statute.
On Oct. 25, Saylor issued an order certifying for interlocutory appeal to the 1st Circuit that portion of his Sept. 27 summary judgment decision addressing the applicable causation standard for the government’s claim.
In justifying his exercise of authority under 28 U.S.C. §1292(b) — which governs interlocutory appeals — Saylor first pointed to the fact that his holding on causation was in direct conflict with the holding of Judge Nathaniel M. Gorton in another Medicare fraud case, U.S. v. Teva Pharmaceuticals. That case involved allegations that the defendant had violated the Anti-Kickback Statute and FCA by virtue of kickbacks paid in the form of unlawful co-pay subsidies in connection with the sale of a multiple sclerosis drug.
Under the causation standard recognized by Gorton in a summary judgment ruling in Teva, the government was required to prove only that a particular patient was exposed to an unlawful recommendation or referral, and that the medical provider followed up by submitting a claim for reimbursement with respect to that patient.
In making the case for the 1st Circuit to exercise its discretion and take up an interlocutory appeal, Saylor wrote that Regeneron “clearly” satisfies the criteria for certification under §1292(b).
“The causation standard when the government seeks to prove that a violation of the AKS resulted in a false claim is a controlling question of law as to which there is substantial ground for difference of opinion, and an immediate appeal will ‘materially advance the ultimate termination of the litigation,’” Saylor wrote. “Among other things, if both this matter and the Teva matter were to proceed to trial — and both trials are expected to be lengthy and complex —at least one of those trials would employ an incorrect causation standard, and thus waste considerable time and resources.”
Further, Saylor noted that in addition to there being a split of authority among judges in Massachusetts, the issue was ripe for appellate review by the 1st Circuit given a split of authority among the three other circuit courts that had addressed the issue.
“The but-for standard is a much more serious burden of proof. Both of these cases are gearing up for trial, and it’s going to have significant impact on what those trials look like.”
Boston attorney Ingrid S. Martin said the importance of what causation standard applies in health care fraud cases such as Regeneron and Teva cannot be overstated.
“The but-for standard is a much more rigorous burden of proof,” said Martin, a government investigations and criminal defense lawyer in Boston. “Both of these cases are gearing up for trial, and it’s going to have significant impact on what those trials look like.”
And because Massachusetts is historically a preferred forum for the filing of FCA claims, Martin said a definitive pronouncement by the 1st Circuit on the causation standard would have the potential to impact many cases already in the pipeline.
Teva moves for certification
In Teva, the defendant drugmaker moved for partial summary judgment on the ground that the government could not show but-for causation. More specifically, the defendant argued that the government could not show that hundreds of millions of dollars in allegedly illegal co-pay subsidies the drug company paid to two charitable foundations over the course of a decade resulted in any Copaxone claims being submitted to Medicare that otherwise would not have been submitted for reimbursement.
Meanwhile, the government responded by moving for partial summary judgment under a “sufficient causal connection” standard suggested by the 1st Circuit in a 2019 case, Guilfoile v. Shields. In that case, the court 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.”
Gorton denied Teva’s partial motion for summary judgment in a July 14 decision. He rejected the defendant’s proffered “but for” standard, concluding that the analysis by the Guilfoile court, while perhaps not binding was “persuasive.”
Teva moved for stay of the case against it and an interlocutory appeal, arguing that the text of the Anti-Kickback Statute dictated a but-for causation standard. Specifically, the drug company pointed to the language of 42 U.S.C. §1320a-7b(g), which provides that “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].”
Defense counsel argued in Teva’s motion for certification that “when Congress chose the phrase ‘resulting from,’ it chose language that has an ‘ordinary, accepted meaning,’ one that ‘imports but-for causality.’”
In an Aug. 14 order, Gorton granted Teva’s motion to stay trial pending resolution of an interlocutory appeal, acknowledging that the case met the 28 U.S.C. §1292(b) standard in that it involved “a controlling question of law as to which there is substantial ground for difference of opinion” and that an immediate appeal from the order in dispute would “materially advance the ultimate termination of the litigation.”
Defense counsel in Teva did not respond to a request for comment.
‘But-for’ standard
In his Sept. 27 summary judgment order in Regeneron, Saylor acknowledged that the meaning of the term “resulting from” in §320a-7b(g) of the AKS “is not settled, and has led to differing interpretations.”
And Saylor recognized that the meaning of “sufficient causal connection” in Guilfoile was unclear.
“Among the principal unsettled questions are (1) the legal standard (but-for causation, or some other, less demanding, standard); (2) the nature and amount of the evidence that the government must present to prove the causal connection; and (3) the extent to which the defendant can offer countervailing evidence of a lack of causation,” Saylor wrote.
In the end, he found compelling the argument that the “resulting from” language used in the AKS dictated a but-for causation standard.
“The adoption by Congress of the ‘resulting from’ language in the statute requires a finding that the appropriate standard is but-for causation, and the Court will follow that approach here,” Saylor wrote.
In adopting a but-for standard in Regeneron, Saylor emphasized that it did not necessarily follow that the government’s burden was “insuperably difficult.”
“To begin, under tort law, but-for causation does not normally require that an actor be the sole factual cause of a harm,” he wrote. “Under traditional principles, a negligent act will satisfy the but-for causation requirement if it was a ‘substantial factor in bringing about’ the harm. It is thus likely that the government will not need to prove that the AKS violation was the only cause of the resulting false claim.”
Martin said that the “but-for” standard is much more defense-friendly, particularly when considering alternative causation standards currently being considered by federal courts.
“It creates a higher burden for the party bringing the claim because they have to make a more specific showing that there’s this connection between the [reimbursement] claim that is submitted and the alleged kickback,” she said.
While favoring the defense, Martin added that the but-for standard is faithful to the “resulting from” language in the Anti-Kickback Statute and in keeping with a proper reading of the False Claims Act.
Defense counsel in Regeneron did not respond to a request for comment.
Circuit split
In reaching his conclusion as to the appropriate causation standard, Gorton was guided by a 2018 decision from the 3rd Circuit, U.S. ex rel. Greenfield v. Medco Health Solutions, Inc. In rejecting a but-for standard, the court in Greenfield reasoned that a lesser standard was justified by legislative intent.
“It appears the drafters of the Anti-Kickback Statute intended ‘to strengthen the capability of the Government to detect, prosecute, and punish fraudulent activities under the [M]edicare and [M]edicaid programs,’ because ‘fraud and abuse among practitioners … is relatively difficult to prove and correct,’” the court wrote. “‘Since the medical needs of a particular patient can be highly judgmental, it is difficult to identify program abuse as a practical manner unless the overutilization is grossly unreasonable.’ This counsels requiring something less than proof that the underlying medical care would not have been provided but for a kickback.”
On the other hand, Saylor followed decisions from the 6th and 8th circuits adopting the but-for standard. In a 2023 decision, U.S. ex rel. Martin v. Hathaway, the 6th Circuit like the 3rd Circuit in Greenfield looked to the legislative history of the Anti-Kickback Statute but drew different conclusions from the congressional record.
“When it comes to violations of the Anti-Kickback Statute, only submitted claims ‘resulting from’ the violation are covered by the False Claims Act,” the court wrote. “The ordinary meaning of ‘resulting from’ is but-for causation. That understanding applies unless strong ‘textual or contextual indication[s]’ indicate a ‘contrary’ meaning. None exists. … Congress added the ‘resulting from’ language in 2010, against the backdrop of a handful of cases that observed similar language as requiring but-for causation.”
The 8th Circuit adopted the but-for standard in a 2022 case, U.S. ex rel. Cairns v. D.S. Medical LLC. In Cairns, the government urged the court to adopt an “alternative” causation standard merely requiring the government to show the illegal kickbacks “tainted” the “claim[] for goods or services” or the anti-kickback “violation itself may have been a contributing factor.”
But the court in Cairns viewed such a standard as fraught with problems.
“These alternative standards, however, are hardly causal at all,” the court wrote. “A ‘taint’ could occur without the illegal kickbacks motivating the inclusion of any of the ‘items or services.’ Similarly, asking the jury if a violation ‘may have been a contributing factor’ does not establish anything more than a mere possibility. And the district court’s instruction may have been the least causal of all: just because a claim fails to disclose an anti-kickback violation does not mean that there is a connection between the violation and the included ‘items or services.’ Causation is an ‘essential element[]’ that must be proven, not presumed.”
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