First Circuit’s Ruling in Regeneron
In Regeneron, the government claimed that the company violated the AKS by covering patient copayments through a charitable foundation, affecting physicians’ prescription behavior. The government argued that subsequent Medicare claims for Eylea were false due to these payments.
Regeneron replied that a claim is only false if an AKS violation directly caused the claim’s submission. The First Circuit agreed, emphasizing that the FCA’s 2010 amendment to the AKS requires a but-for causation requirement. This decision aligns with the Supreme Court’s interpretation in Burrage v. United States, which also focused on actual causality.
Alignment with Other Circuits
The First Circuit agrees with the Sixth Circuit’s ruling in United States ex rel. Martin v. Hathaway, and the Eighth Circuit’s decision in United States ex rel. Cairns v. D.S. Medical LLC. Both courts held that an FCA claim is only false if there is a direct causal link between an AKS violation and claim submission.
This stricter approach contrasts sharply with the Third Circuit’s ruling in United States ex rel. Greenfield v. Medco Health Solutions, Inc. (2018). This earlier decision allowed the government to establish FCA liability without proving that the alleged unlawful payment influenced the claims process.
The new ruling reinforces a higher bar for proving causation, narrowing the scope of FCA liability and making it harder to build cases on speculative causation theories.
Implications for Healthcare and Life Sciences Companies
The decision adds challenges for FCA enforcement and whistleblowers, as they must now establish that a kickback directly led to claim submissions.
Increased Difficulty in FCA Enforcement and Whistleblower Claims
The requirement for but-for causation raises the bar for proving FCA liability, especially concerning financial arrangements that were ostensibly proper but could be seen as suspicious.
Pharmaceutical companies, medical device manufacturers, and healthcare providers will need to demonstrate that their arrangements were not devised to manipulate prescribing decisions.
Deepening Circuit Split and Supreme Court Review
A split now exists between the First, Sixth, and Eighth Circuits favoring a stricter standard and the Third Circuit’s more lenient stance.
A Supreme Court ruling could clarify the standard nationwide, leading to a more consistent application of the law.
Until then, companies should be aware of different standards and adjust their compliance strategies accordingly.
Importance of Compliance Programs and Safe Harbor Protections
Compliance with AKS safe harbors will become even more critical for mitigating risks.
Financial arrangements with providers and third parties should be designed to fit within safe harbor protections, ensuring they have legitimate business purposes.
HHS advisory opinions can provide valuable guidance on navigating these complex compliance issues.
Proactive Risk Management in Business Transactions
Proactive measures are necessary to manage regulatory risk in the health care market.
Companies should conduct internal audits, review contractual arrangements, and ensure that all discounts, rebates, and financial incentives comply with AKS requirements.
Training programs should emphasize proper business practices, and internal documentation should clearly justify financial arrangements.
By taking such steps, companies can better protect themselves from potential FCA liability.
Conclusion
The First Circuit’s decision in Regeneron sets a stricter standard for FCA liability in the context of AKS violations, requiring actual causation to establish FCA liability.
A Supreme Court review could solidify this standard, affecting how FCA enforcement efforts are conducted.
Healthcare and life sciences companies must remain vigilant about AKS compliance and manage regulatory risks proactively.
For more information on how this decision affects your organization, please contact our Government Enforcement and Investigations team and our Health Care and Life Sciences Litigation team.
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