Earlier this year on February 18, 2025, the U.S. Court of Appeals for the 1st Circuit issued a significant decision with implications not only for companies in the health care industry, but for any organization doing business with the federal government. Specifically, in United States v. Regeneron Pharmaceuticals Inc., the 1st Circuit held that for claims brought under the federal False Claims Act (FCA) premised on alleged violations of the Anti-Kickback Statute (AKS), the government must prove that the submission of the false claim for federal reimbursement would not have occurred “but for” the AKS violation. This standard is higher than what the government was urging, and is a notable win for defendants.
Christopher J. Walsh
Background of the case
Regeneron is a pharmaceutical company that manufactures Eylea, one of the only FDA-approved drugs for treating a degenerative eye condition called neovascular age-related macular degeneration, also known as wet AMD. Eylea is a “buy and bill” drug under Medicare Part B, meaning that physicians buy the drug, prescribe it, administer it in their offices and then submit a claim for reimbursement to Medicare. While Medicare covers 80% of Eylea’s cost, the patient must pay the remaining 20%.
Because Eylea is expensive and some patients cannot afford co-pays for periodic treatments as prescribed, Regeneron regularly donated to a charitable foundation that provided co-payment assistance to patients suffering from wet AMD. The U.S. Department of Justice sued Regeneron in 2020, alleging that Regeneron’s $60 million in foundation payments were not in fact charitable donations, but rather were disguised kickbacks meant to induce physicians to prescribe Eylea. The federal FCA imposes potentially massive civil liability on anyone who “knowingly presents, or causes to be presented, a false or fraudulent claim for payment or approval,” and the federal AKS provides that “a claim (for payment by a federal healthcare program) that includes items or services resulting from a violation of (the AKS) constitutes a false or fraudulent claim for purposes of” the FCA. In other words, the government alleged, Regeneron’s payments to a charitable foundation in violation of the AKS caused false claims for Eylea to be submitted for Medicare reimbursement, and Regeneron was thus on the hook for the civil liability provided for by the FCA.
The 1st Circuit’s decision
In a long-anticipated decision, the 1st Circuit sided with Regeneron’s argument about the proper interpretation of the AKS and FCA. Specifically, Regeneron argued that a claim only “results from” an AKS violation if it includes “items or services” that would not have been paid for by the government absent the AKS violation.
Put another way, as Regeneron argued, an AKS violation must be a but-for cause of the challenged claim. As applied to the facts here, if a doctor would have purchased (and sought reimbursement for) Eylea anyway, then the subsequent Medicare claim could not have “result(ed) from” Regeneron’s allegedly illicit payments.
The 1st Circuit rejected the government’s contention that it only needed to show that a particular patient was exposed to an illegal recommendation or referral and that a provider submitted a claim for reimbursement pertaining to that patient.
While the AKS is a criminal statute and it “makes sense for the AKS to criminalize even those kickbacks that do not ultimately cause a referral or purchase,” the FCA, by contrast, is a civil statute and “‘the chief purpose’ of the FCA’s civil penalties is ‘to provide for restitution to the government of money taken from it by fraud.’” Accordingly, the 1st Circuit was unpersuaded by the government’s proposed standard, which would allow claims for Eylea to “‘result from’ a kickback even if that kickback had no causal impact whatsoever on a patient’s decision to opt for” the treatment.
Significance of the decision and looking ahead
The 1st Circuit’s legal analysis requiring “but for” causation in this context is consistent with how the 6th and 8th Circuits have interpreted the relevant statutes as well. On the other side, however, the 3rd Circuit employs a more lenient “causal link” standard whereby the government need only identify claims that were “exposed to” illegal remuneration in order to render a claim false for purposes of the FCA. With this growing split among the circuits, many observers believe the U.S. Supreme Court could take up the issue sooner than later.
Beyond the potential for U.S. Supreme Court review, the Regeneron decision has an immediate impact not only for companies in the health care and life sciences industry. While the Regeneron fact pattern involved a pharmaceutical company, the 1st Circuit’s legal analysis is applicable to any organization and could have an impact on any industry that receives federal funds, including defense contracting, transportation, and others.
While the decision should not be viewed as license for companies to scale back their compliance efforts, and companies should continue to conduct their own periodic internal audits and risk assessments (including with the assistance of outside counsel and other professionals), whistleblowers and the government alike will now have to meet a higher burden in proving claims under this FCA theory within the 1st Circuit.
Chris Walsh is a director and member of McLane Middleton’s Litigation Department and Business Litigation Practice Group. He can be reached at christopher.walsh@mclane.com.
