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Update on Causation in False Claims Act Cases Predicated on Violations of the Anti-Kickback Statute

Last week, I posted on the likely limited effect of the Eighth Circuit’s decision in United States ex rel. Cairns v. D.S. Medical, LLC, 42 F.4th 828 (8th Cir. 2022), which held that the government (or the relator) must prove “but-for” causation to show damages in a False Claims Act case predicated on violations of the anti-kickback statute. Yesterday, the Sixth Circuit followed Cairns. See United States ex rel. Martin v. Hathaway, et al., No. 22-1463 (6th Cir. Mar. 28, 2023).

While Martin undoubtedly deepens the circuit split on the meaning of “resulting from” in the 2010 amendment to the anti-kickback statute, I continue to believe that decisions like Cairns and Martin should have limited effect on these types of cases, for three reasons:

First, but-for causation is not always a difficult standard to meet. If, for example, the defendant created a return on investment (“ROI”) analysis on the impact of its alleged kickback, then the defendant itself will have supplied the evidence to show but-for causation. ROI analyses are surprisingly common in AKS cases, because companies often want to be sure that they are spending their money in a way that will generate increased revenue, even if the spending is illegal. See, e.g., Stipulation and Order of Settlement and Dismissal, United States v. Novartis Pharmaceuticals Corp., No. 11cv0071 (S.D.N.Y. July 1, 2020) (“Novartis had staff in its marketing science group to measure its return on investment (‘ROI’) from speaker programs and roundtables, based on the number of new prescriptions for its drugs written by doctors in attendance.”). Company documents also may contain documentary evidence of employees crowing about the success of their kickback arrangements, or of their need to pay kickbacks in order to make sales. Those documents, too, may be strong evidence of but-for causation. Other times, the plaintiff may have to use an expert’s analysis of data to show the change in behavior that the kickbacks caused. While that method is more expensive and can be more complicated, it can be very effective.

Second, as I noted in my last blog post, in cases where proving but-for causation would be difficult, the traditional material-falsity theory often presents a viable alternative. The court recognized as much in United States ex rel. Fesenmaier v. The Cameron Ehlen Group Inc. Inc., 2023 WL 36174 (D. Minn. Jan. 4, 2023). Thus, for example, in United States ex rel. Hutcheson v. Blackstone Medical, 647 F.3d 377 (1st Cir. 2011), the court reversed dismissal of a qui tam complaint alleging that, when a device company paid kickbacks to physicians who used the company’s devices in surgeries performed at hospitals, the hospitals’ and physicians’ subsequent Medicare claims were false because the providers had certified to Medicare that they had complied with the anti-kickback statute. The court held that “the claims presented to the government in this case, as alleged, represented that there had been compliance with a material precondition of payment that had not been met.” Id. at 392. Notably, the court also rejected “the argument that a submitting entity’s representations about its own legal compliance cannot incorporate an implied representation concerning the behavior of non-submitting entities.” Id. at 379. In other words, even if a hospital did not know that one of its surgeons had taken a device company’s kickback, the device company was still liable for causing the hospital to submit a claim predicated on the hospital’s unwittingly false certification of compliance with the anti-kickback statute.

Of course, Congress adopted the “resulting from” language because a district court reached the opposite conclusion in United States v. Bailey, No. 4:06cv465, 2008 WL 4853630 (E.D. Ark. Nov. 6, 2008) (finding that hospitals “did not impliedly or expressly certify that the physicians who attended patients in their hospital complied with [the anti-kickback] statute”). Consequently, the material-falsity theory may not be viable in every court.

Finally, as I also noted in my last blog post, the courts are far from unanimous in construing “resulting from” to require a showing of but-for causation. Notwithstanding Cairns and Martin, many courts have held that, under the 2010 amendment to the anti-kickback statute, the plaintiff in a False Claims Act case need merely show that a kickback tainted the claims by, for example, exposing one party to a transaction to illegal remuneration. See, e.g., United States ex rel. Greenfield v. Medco Health Solutions, Inc., 880 F.3d 89, 100 (3d Cir. 2018) (holding that a False Claims Act case predicated on alleged kickbacks to patients would have to show that “a particular patient is exposed to an illegal recommendation or referral and a provider submits a claim for reimbursement pertaining to that patient”).