In a pivotal decision, the U.S. Court of Appeals for the First Circuit has raised the bar for proving False Claims Act (FCA) violations tied to kickbacks. The ruling has significant implications for pharmaceutical and biotech companies. In U.S. v. Regeneron Pharmaceuticals Inc., the court introduced a tougher “but-for causation” standard that could reshape how the government and whistleblowers pursue FCA claims under the Anti-Kickback Statute (AKS).
Here’s what this means for life sciences companies, why it matters, and how to reduce risk in light of the ruling.
The Legal Background: FCA and Anti-Kickback Statute Interplay
The FCA permits the government—and whistleblowers—to sue entities that submit false claims for federal healthcare funds. When claims involve kickbacks, penalties are significantly higher. Under the AKS, it’s illegal to offer or receive anything of value in exchange for referrals or federally reimbursed healthcare services. FCA claims can carry hefty penalties, including triple damages.
A 2010 FCA amendment says that any claim “resulting from” a kickback is considered false. The key question: how direct must that connection be?
What the First Circuit Decided
In Regeneron, the court sided with Regeneron, ruling that the government had to prove the claim would not have been submitted but for the kickback. A mere tangential link won’t meet this standard. Instead, plaintiffs must show that the inducement caused the physician to prescribe the drug. This marks a significant shift in how FCA causation is assessed.
This decision involved Regeneron’s copay assistance program for Eylea—a vision drug costing Medicare about $11.5 billion over a decade—which regulators had alleged improperly influenced treatment choices. The court found the government failed to show the required direct connection.
How this Ruling Impacts Pharma Companies
1. Higher Bar for FCA Enforcement
You now need clear, direct proof in First Circuit jurisdictions. Claims based on indirect or circumstantial links are less likely to succeed.
2. Circuit Split Creates Legal Uncertainty
Other courts, including the Third Circuit, apply a more relaxed causation standard. Until the Supreme Court steps in, FCA risk will vary depending on where cases are brought.
3. Compliance Programs Remain Crucial
While favorable, this ruling doesn’t eliminate liability or diminish the need for strong compliance. Regulators continue to scrutinize patient assistance programs—given concerns about inducement or Medicare/Medicaid cost inflation—as well as provider contracts and financial relationships. Companies should review their compliance frameworks to ensure they hold up under the stricter “but-for” test.
What Pharma and Biotech Companies Should Do Now
- Audit copay and support programs to ensure they’re structured to avoid the appearance of steering treatment decisions.
- Review provider and patient group contracts to include anti-kickback clauses and compliance language.
- Train teams on FCA risk signals so they can identify risky practices in everyday business contexts.
- Monitor legal developments closely. With a circuit split and possible Supreme Court review, liability standards may shift.
Final Thoughts: Stay Proactive, Not Reactive
The First Circuit’s decision gives companies some breathing room—but enforcement remains strong. Regulators continue to focus on financial programs tied to federal healthcare funds.
At Lapis Legal, we help life sciences companies navigate these complex issues with clear, pragmatic, business-focused advice. Whether you need compliance audits, provider agreement reviews, or risk mitigation programs, we help you stay ahead of the risk.
📩 Want to understand how this ruling might affect your FCA risk profile? Or need help auditing patient support programs, provider agreements, or financial relationships? Let’s talk.
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