First Circuit Poised to Consider Anti-Kickback Statute’s Causation Element in FCA Cases, Take a Position on Circuit Split
by Pablo J. Davis
Conflicting interpretations of the causation standard in two AKS-predicated False Claims Act cases in the District of Massachusetts, Teva and Regeneron, mirrored the circuit split on the issue and led to interlocutory appeals before the First Circuit. The court’s eventual decision could have a major impact on the national landscape around this high-stakes question. By joining the Eighth and Sixth Circuits, the First Circuit would solidify a 3–1 majority around “but for” causation, while following the Third Circuit’s more relaxed “link” rule would knot the circuits at 2–2. Oral argument is scheduled for July.
The First Circuit is poised to decide a prominent question in False Claims Act (FCA)[1] litigation: the causation standard for FCA claims predicated on Anti-Kickback Statute (AKS)[2] violations. Twin interlocutory appeals were brought before the court from conflicting summary judgment rulings in the District of Massachusetts, in United States v. Teva Pharmaceuticals USA, Inc.[3] and United States v. Regeneron Pharmaceuticals, Inc.,[4] mirroring a circuit split. While the Teva appeal has just been placed in abeyance to allow for settlement negotiations,[5] the Regeneron appeal remains active and will require the court to take a position on the issue.
An AKS-predicated FCA action must show the defendant sought government payments for “items or services resulting from” the AKS violation.[6] The Eighth and Sixth Circuits interpret “resulting from” to mean “but for” causation[7]—i.e., the claim for payment “would not have [been presented] in the absence of—that is, but for” the alleged kickback.[8] The Third Circuit merely requires plaintiffs to show “a link” between the AKS violation and presentment of a payment claim.[9] The district courts’ opposing decisions mirror the circuit split, with Teva applying the Third Circuit’s laxer standard and Regeneron following the stricter test of the Eighth and Sixth. Given the radically different hurdles plaintiffs face under the respective tests and the volume of AKS-based FCA lawsuits, the First Circuit’s decision will likely be significant.
The circuit split
The “link” or “exposure” test. In U.S. ex rel. Greenfield v. Medco Health Solutions, Inc., the Third Circuit reversed the district court’s summary judgment grant to defendants, finding it “too exacting” to require plaintiffs to prove “federal beneficiaries would not have used the relevant services absent the alleged kickback scheme.”[10] Instead, it held the AKS’s “resulting from” language only requires plaintiffs to prove “a link”—that a patient was “exposed to an illegal recommendation or referral” and a provider subsequently submitted a reimbursement claim “pertaining to that patient.”[11] However, the court rejected the relator’s proposed “taint” standard.[12]
Implying that the statutory phrase “resulting from” is “arguably not plain,”[13] the court turned directly to legislative history, rejecting “but for” causation as undermining the AKS drafters’ “inten[t] to strengthen” the government’s ability to fight Medicare fraud.[14] The court found it “incongruous” that an AKS criminal conviction would not also trigger civil liability under the FCA, even absent proof of direct causation.[15] The “relative[] difficult[y]” of proving Medicare fraud, in the court’s view, “counsels requiring something less than proof that the underlying medical care would not have been provided but for a kickback.”[16]
“But for” causation. Four years after Greenfield, the Eighth Circuit held in Cairns v. D.S. Medical LLC that the “resulting from” requirement meant proving “defendant[s] would not have included particular items or services but for the illegal kickbacks.”[17] The court approached the issue as one of statutory interpretation: when “a statute is unambiguous, interpretation both begins and ends with the text.”[18] Unlike the Third Circuit, the Eighth Circuit found the meaning of “resulting from” plain, essentially identical to “results from” in the Controlled Substances Act—where “but for” causation is required.[19] More broadly, “but for” causation is the “default” or “background” common law rule against which Congress legislates. Absent contrary textual indications, the court declined to wade into legislative history in a quest to divine “the drafters’ intentions.”[20] The following year, the Sixth Circuit followed suit in U.S. ex rel. Martin v. Hathaway, reasoning along similar lines to Cairns and likewise concluding that the statute’s “resulting from” phrasing dictates “an ‘unambiguously causal’ standard.”[21] The court stressed that Congress could have articulated a less stringent causation test, such as “provided in violation of,” but did not choose do so.[22]
Dueling district court holdings
In August of 2023, U.S. District Judge Nathaniel M. Gorton applied the Third Circuit’s “link” test in Teva, granting summary judgment to the government (and denying it to defendant) on causation.[23] In Teva, the government alleged the defendant, a manufacturer of multiple sclerosis medication, illegally subsidized Medicare co-pays through contributions to a foundation—payments the government characterized as kickbacks meant to promote prescriptions of defendant’s drug.[24] The government further alleged the payments led to the filing of false Medicare reimbursement claims.[25]
Regarding causation, the court relied on Guilfoile v. Shields, where the First Circuit 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.”[26] However, the court did not explicitly address what would make a causal connection “sufficient”; indeed, it went on to state merely that the government “must prove a ‘causal connection’” between defendant’s “contributions” to the foundations “and the resulting . . . claims that Medicare reimbursed.”[27] Nor did the court explain its reasons for rejecting the “but for” test,[28] or discuss or even mention Cairns and Martin.[29]
Two months later, Chief U.S. District Judge F. Dennis Saylor, performing a detailed statutory analysis in Regeneron,[30] endorsed the majority “but for” standard[31] and denied the government summary judgment as to causation.[32] In Regeneron, the defendant eye medication manufacturer made payments to a charity that helps cover needy patients’ drug co-pays.[33] The government alleged the payments were made to boost defendant’s drug sales.[34] Causation became key: even if the payments violated the AKS, did they actually cause submission of false Medicare reimbursement claims, triggering FCA liability?[35] To answer this, the district court had to scrutinize the unsettled meaning of the statutory phrase “resulting from.”[36]
The court found Greenfield’s reasoning unpersuasive,[37] underscoring the absence there of textual analysis of the phrase “resulting from” or an examination of its use in other statutory contexts, in favor of exploring legislative history.[38] Instead, the court endorsed the Eighth Circuit’s view in Cairns that where a statutory text is “unambiguous,” “interpretation both begins and ends with the text.”[39] The court found Greenfield’s “link” or “exposure” standard to be “fraught with problems,”[40] noting that the meaning of “exposure” is neither “set forth in the statute” nor “part of a familiar common-law framework,” and is therefore unclear.[41]
Ultimately, the court found Cairns and Martin persuasive, agreeing that Congress’s adoption of “the ‘resulting from’ language in the statute requires a finding that the appropriate standard is but-for causation.”[42] And while meeting that standard is harder than merely showing a “link,” the court noted it is not unreachable—circumstantial evidence, reasonable inferences, temporal proximity, and other forms of evidence can all help clear the preponderance hurdle and demonstrate causation.[43]
Appeal to First Circuit
Teva was certified for interlocutory appeal on defendant's motion, which pointed to the active circuit split and the possibility of a contradictory holding in Regeneron (then pending).[44] Subsequently, after his contrary decision in Regeneron,[45] Chief Judge Saylor sua sponte certified an interlocutory appeal in that case,[46] observing that the “split between the two judges of this court reflects a split in the circuits,” making the issue one “of national importance.”[47] Notably, the defendant supported interlocutory review even though it had won summary judgment on the issue.[48]
The First Circuit accepted the appeals and set joint oral argument (now in Regeneron only) for July 22, 2024. In briefing, defendants have anchored their argument for the “but for” test in the plain meaning of the statute’s causation language,[49] while the government has characterized the “but for” standard as a mere “default” rule[50] which can be overcome by contrary “textual or contextual indication.”[51]
The interlocutory appeal will be closely watched. If the First Circuit endorses the “but for” standard, that view would enjoy a strengthened, 3–1, majority, while an opposite decision would even up the circuit split and increase the chances of eventual Supreme Court consideration. Dinsmore’s FCA Team will monitor the litigation and keep our clients and interested readers posted.
[22] Id. at 1053 (quoting Cairns, 42 F.4th at 836). The Sixth Circuit also took issue with the legislative history approach on the ground that the AKC is “a statute with criminal applications.” Id. at 1054 (quoting United States v. R.L.C., 503 U.S. 291, 307–10 (1992)) (Scalia, J., concurring)) (“[N]o one should be imprisoned based on a document or statement that never received the full support of Congress and was [not] presented to the president for signature.”) (alteration added).
[26] Id. at 146 (quoting Guilfoile, 913 F.3d 178, 190 (1st Cir. 2019)). Guilfoile, in turn, relied on the Third Circuit’s holding in Greenfield. See 913 F.3d at 190 (citing U.S. ex rel. Greenfield v. Medco Health Sols., Inc., 880 F.3d 89, 96–98 (3d Cir. 2019)) (endorsing “sufficient causal connection” standard).
[27] See id. (citing Guilfoile, 913 F.3d at 190) (emphasis added).
[29] See id. The court did not provide an explanation of what makes a causal connection “sufficient”; the evidence it found sufficient to withstand defendant’s summary judgment motion as to causation included evidence that defendant “intended to induce” drug sales through the contributions, that patients told defendant they needed financial assistance to afford the drug, and that defendant “understood it was profitable to provide co-pay assistance to generate sales.” See id. at *146. While this evidence is manifestly probative of the AKS knowledge element, it is less clear how it can satisfy causation.
[37] Id. at *27–31. As a threshold matter, the district court analyzed and rejected the government’s argument that Greenfield was binding on the court because the First Circuit relied on it in Guilfoile v. Shields. Id. at *20 (quoting Guilfoile, 913 F.3d 178, 190 (1st Cir. 2019)) (“[T]he First Circuit cited [Greenfield] in Guilfoile for the proposition that there must be ‘a sufficient causal connection’ between the violation and the submitted claim.”) (alterations added). The district court concluded it was not bound by Greenfield, reasoning that, while the First Circuit relied on it in Guilfoile, that opinion did not delve into Greenfield’s causation analysis because the issue before the Guilfoile court was the pleading standard for an FCA retaliation claim; that Guilfoile “did not elaborate on what it meant by a ‘sufficient causal connection,’” and that Guilfoile “expressly disclaimed making any decision on the ‘full implications’ of the statute.’” See id.
[44] Teva, Civ. A. No. 20-11548-NMG (D. Mass.), DE 196 (July 26, 2023); see also DE 235 (Aug. 14, 2023) (grant of motion for certification of interlocutory appeal). Defendant’s brief noted that, at the end of 2022 in Flanagan, Chief Judge Saylor had hinted (without deciding) that AKS-predicated FCA claims likely required proof of “but for” causation. See DE 198 (July 26, 2023) at 7–8 (citing Flanagan, 2022 U.S. Dist. LEXIS 218302, at *51–52).
[45] 2023 U.S. Dist. LEXIS 172618.