Mass. Federal Court Adopts More-Stringent Causation Standard for FCA Claims Based on Alleged Unlawful Kickbacks

A Massachusetts federal court ruled that, to prove a False Claims Act (FCA) violation based on an unlawful kickback, the kickback must be the “but for” cause of the claim.

In 2020, the government sued a pharmaceutical manufacturer under the FCA in connection with Medicare reimbursements for prescriptions of an eye disease drug.  The pharmaceutical manufacturer was the main donor to a charitable fund which covered copays, deductibles, and co-insurance payments for Medicare patients who were prescribed the pharmaceutical manufacturer’s eye disease drug.  The government alleged that the pharmaceutical manufacturer’s donations to the charity—which were made for the purpose of reimbursing the copays of patients who received its drugs—violated an anti-kickback statute.  Specifically, the benefits given by the charity were designed to induce prescriptions of the drug, which would in turn lead to Medicare payments for the drug.  The government claimed that the resulting claims to Medicare were tainted by the alleged illegal kickbacks in violation of the FCA.

The parties filed competing motions for summary judgment.  The court denied both sides’ motion, finding for the most part that sufficient factual disputes existed to prevent summary judgment for either.

In relevant part, however, the court noted that improperly structured donations to a copay-assistance charity could constitute unlawful kickbacks if they were made with the intent to induce Medicare-funded referrals or drug purchases.  With respect to causation, this requires that the claim to the government must have resulted from the unlawful kickback.  The court interpreted this as a “but for” causation standard and rejected the government’s assertion that the kickback need only have “some connection” to the claim.  Though the court acknowledged that decisions from across the country have split on this point, it found that the “but for” causation standard flowed from the language of the statute and is generally the default causation standard for laws enacted by Congress.  Further, accepting the much looser “some connection” standard would likely result in FCA liability for what would otherwise be good-faith actions.