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First Circuit Ruling Requiring “But-For” Causation In FCA Kickback Claims Deepens Circuit Split
03/11/2025In an opinion that may complicate the U.S. Department of Justice’s (“DOJ”) efforts to enforce the False Claims Act (“FCA”), the U.S. Court of Appeals for the First Circuit held in a unanimous opinion on February 18, 2025 that the DOJ must show that illicit kickbacks were the “but-for” cause that led medical providers to submit claims for reimbursement to federal health care programs. United States v. Regeneron Pharms., Inc., No. 23-2086, slip op. (1st Cir. Feb. 18, 2025). This ruling significantly increases the DOJ’s and a private relator’s burden when attempting to bring an action under the FCA by requiring a direct link between kickbacks received and subsequent claims submissions. The First Circuit opinion deepens the current circuit split regarding the interpretation of the 2010 amendment to the Anti-Kickback Statute (“AKS”), aligning the First Circuit with the Sixth and Eights Circuits and rejecting the Third Circuit’s more lenient approach.
At-issue before the First Circuit was a 2010 amendment to the AKS which provides that any Medicare claim “that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].” (emphasis added). The DOJ has historically sought billions of dollars in fines by alleging that pharmaceutical companies and medical device manufacturers induced medical providers to prescribe a given drug or device through the provision of kickbacks, including fairly common gifts, travel, and hospitality. See “False claims act settlements and judgments exceed $2.9B in fiscal year 2024,” United States Department of Justice (January 15, 2025), https://www.justice.gov/archives/opa/pr/false-claims-act-settlements-and-judgments-exceed-29b-fiscal-year-2024 (noting that “[k]ickbacks paid or received by health care providers undermine the integrity of federal health care programs by tainting medical decision-making, increasing health care costs, and adversely affecting competition.”).
In Regeneron, the drug at issue was defendant’s relatively expensive treatment for an ophthalmological condition. The co-payment owed by patients for the course of treatment was onerous for some patients and may have deterred their ability to afford the treatment. The DOJ alleged that Regeneron violated the AKS by indirectly providing copayment assistance to patients by making charitable donations to a foundation, which in turn reimbursed doctors or patients for the copayments. According to the DOJ, Regeneron’s donations to the foundation amounted to unlawful kickbacks that tainted the medical providers’ decision to prescribe the treatment and rendered the associated Medicare claims violations of the FCA. Relying on the 2010 amendment’s “resulting from” language, Regeneron argued that the DOJ was required to prove that the AKS violation actually caused a physician to prescribe a different medical treatment and thus caused the false claims. Put simply, Regeneron’s view was that if a doctor would have prescribed its drug and submitted a Medicare claim, even if the co-payment assistance from the charitable donation did not exist, then the claim could not have “resulted from” an AKS violation. The district court agreed and dismissed the complaint, certifying the issue for interlocutory review.
In its February 18, 2025 decision, the First Circuit affirmed the district court’s ruling, finding no convincing textual or contextual reason to deviate from the default presumption that the phrase “resulting from” in the 2010 amendment imposes a “but-for” causation standard. The Court noted that the Supreme Court has held that a phrase like “resulting from” requires proof of actual causality, which in the usual course takes the form of “but-for” causation, unless there are indications that Congress intended otherwise. The Court found no such indications in the 2010 amendment itself, in the statutory scheme of the AKS and the FCA, or in the legislative history of the amendment. The Court also rejected the DOJ’s contention that the “but-for” standard would undermine the purpose of the AKS by making it too difficult to prove FCA violations based on kickbacks.
As the future of other government enforcement initiatives under the second Trump administration remains cloudy, the First Circuit’s decision is a significant development for FCA enforcement which is expected to continue apace for both DOJ and private relators. This decision raises the level of scrutiny that the government and qui tam relators will face at the pleadings stage when bringing FCA claims and seems likely to result in review by the U.S. Supreme Court. In the meantime, health care companies should continue to exercise caution when engaging in any arrangements with providers or third parties that could implicate the AKS, as the statute remains a powerful enforcement tool and DOJ or relators may have the ability to file claims in circuits that will not join in the First Circuit’s view.
