This week’s class at BU Law School in Bob Thomas’ course on Health Care Fraud and Abuse started the deep dive into theories of liability under the False Claims Act, and recent ways in which the law has evolved.
Starting with the language from the False Claims Act, the question of what actually is “false or fraudulent” within the meaning of the law was a good place to start. Most “claims” are on their face truthful (e.g., provider treated patient in XYZ manner on ABC date), so how does the statute capture concepts of falsity or fraud in these circumstances? If a doctor’s medical judgment has been polluted by a kickback or by illegal off-label promotion, for example, how does that make the doctor’s claims for reimbursement “false or fraudulent”?
Courts grappling with this question came up with their own body of judge-made law, using concepts of “express” and “implied certification” to hold (sometimes) that as a “condition of participation” in government health care programs or a “condition of payment”, there can be embedded in every claim an express or implied certification of compliance with applicable laws. Thus, the argument goes, the government requires that contractors obey applicable laws and contracts only for “taint-free” services and is entitled to reimbursement where claims, even those that on their face are truthful, have been tainted by illegality. The entity engaged in the bad conduct “caused” the doctor to submit a tainted claim, the theory goes.
Some courts have had trouble with these concepts, particularly where the non-compliant activity was, relatively speaking, trivial in nature or something that the paying government agency was already well aware of. The Supreme Court recently clarified this complicated landscape — to a degree — in its Escobar decision of 2016. In Escobar, the Court held that “implied certification” is a valid theory of liability, BUT that only false claims “material” to the agency’s payment determination would count for liability under the FCA. In other words, if the transgression, had it been known, would have had a reasonable chance of changing the agency’s decision to pay the claim, then it’s material. Lawyers have been quick to point out, however, that “materiality” is a factual question requiring discovery from government agencies. So while it may be easier for whistleblower suits to survive initial legal challenges (motions to dismiss), the discovery phase of a case could be tricky as defense lawyers try to prove that a paying agency such as the Center for Medicare and Medicaid Services (“CMS”) was sufficiently aware of the issue and didn’t care enough about it to deny the claims. Lots of work for lawyers ahead on that front.
As an example of an “implied certification” type claim, the seminar explored the current state of liability theories relating to “off-label promotion” of drugs and/or medical devices. This theory, long a favorite of prosecutors, is premised on the notion that the marketing of unapproved uses of drugs or devices can lead to FCA liability. While doctors are free to write prescriptions off label, companies are constrained by regulations from the Food and Drug Administration (“FDA”) in what they can say to promote such uses. Running afoul of those restrictions has landed many a company in hot water on the theory of implied certification: that claims are valid only if they are not tainted by illegal activity that caused the claim to happen.
Recently, however, the defense bar has successfully argued for a free speech (First Amendment) limitation on such FDA regulation and FCA liability. The argument, successfully advanced in a Second Circuit case known as Caronia, is that if there is nothing false or misleading about off-label promotion, it must be protected by the “commercial speech” doctrine under the First Amendment. The Supreme Court has not taken this question up directly, so Caronia is the law only in the Second Circuit Court of Appeals, but prosecutors are now forewarned that any off-label case they bring should include, at a minimum, some showing of falsity or deception, or some material omission in the communications in order to survive a defense challenge under the First Amendment.
Finally, as a way of tying together some of these concepts of “materiality” under Escobar and deceptive marketing, the class examined the tricky fact pattern that is often presented in off-label scenarios: where the FDA has expressly not approved a certain use, but CMS has decided, based on available data in certain “compendia”, to reimburse off-label claims anyway. Under Escobar, the fact that the paying agency is aware of the off-label promotion and literature, even reviews it, and pays the claim anyway makes prosecution of an off-label case highly problematic. A prosecutor or whistleblower lawyer would need, for an FCA case to survive, substantial evidence of false and deceptive practices, or other illegal conduct like kickbacks, to keep such a case alive.
Speaking of kickbacks, that’s what the class will talk about next week.