The Year Ahead: 2023 Enforcement Trends to Watch

Now that we have tackled some important cases to watch, let’s take a look at potential enforcement trends to watch.

The Anti-Kickback Statute

Since the Anti-Kickback Statute (AKS) was amended in 2010 to add a provision that most courts interpret as making a violation of the AKS a per se violation of the False Claims Act.[1] Such criminal kickbacks have been a frequent target of FCA enforcement.However, in July 2022, the Eighth Circuit adopted a novel causation standard for AKS based FCA cases.

In U.S. ex rel. Cairns v. D.S. Med., LLC[2] the Eighth Circuit invoked the Supreme Court’s statutory interpretation of “resulting from” in a previous criminal statute to hold that a plaintiff was required to show “but-for” causation and that a relator must establish the defendant would not have included particular items or services in its claims to the government but-for the illegal kickbacks. This decision conflicts with the Third Circuit’s holding in U.S. ex rel. Greenfield v. Medco Health Sols. Inc.[3], and the vast majority of other courts, that there must only be “some connection,” but not actual causation, between the claims submitted to the government and the alleged kickbacks. In addition, the Cairns court specifically did not address false certification as a theory of liability for AKS-based FCA allegations, though courts have often cited false certification as the basis for allowing AKS-based FCA allegations to go forward.

Although the Eighth Circuit is the only circuit to decide this issue this way, defendants will likely invoke Cairns as a new defense to FCA claims premised on AKS violations, potentially creating further divides among the district courts and other circuits.

And yet another AKS circuit split may be lurking around the corner. Alongside Pfizer’s failed bid for Supreme Court review of a Second Circuit decision, a coalition of pharmaceutical companies sued the Office of Inspector General at the U.S. Department of Health and Human Services (HHS-OIG) in the Eastern District of Virginia. The pharmaceutical company plaintiffs in both the Second Circuit and Eastern District of Virginia cases argued the AKS requires “corrupt” intent. After the Second Circuit rejected Pfizer’s argument and the Supreme Court denied certiorari, the law of the land in the Second Circuit unequivocally holds that the AKS does not require corrupt intent.[4] However, the coalition’s progression of separate, but nearly identical, litigation in the Fourth Circuit suggests pharmaceutical companies may be taking a “try, try again approach” until they find a favorable Circuit, leaving all eyes on the AKS and the Fourth Circuit in the coming months.

Medicare Advantage

The U.S. Department of Justice (DOJ) has identified Medicare Advantage, or Medicare Part C, as an “important priority” for the department, filing even more Medicare Part C complaints in recent months against private insurance plans and providers. In May 2022, the American Hospital Association also sent Acting Assistant Attorney General Brian M. Boynton a letter urging the DOJ to establish a Medicare Part C task force to conduct FCA investigations against commercial insurers exploiting the Part C program. However, while the government has intervened or initiated several Medicare Part C cases, many defendants—and especially large insurers—continue to defend against the government’s advances.[5]

These and other cases in active litigation will continue to draw attention to fraud in Medicare Part C, especially as its enrollment soon surpasses traditional Medicare and has proven to cost taxpayers even more than its traditional Medicare counterpart.

Cybersecurity Fraud

In October 2021, the DOJ announced a civil cyber-fraud initiative to “hold accountable entities or individuals that put U.S. information or systems at risk by knowingly providing deficient cybersecurity products or services, knowingly misrepresenting their cybersecurity practices or protocols, or knowingly violating obligations to monitor and report cybersecurity incidents and breaches.” In March 2022, the DOJ settled its first FCA case under the new initiative, obtaining nearly $1 million from a medical services contractor for its alleged failures to securely store patient medical records in accordance with contract requirements. In July 2022, the DOJ announced a $9 million settlement to resolve allegations that a defense contractor misrepresented its compliance with cybersecurity requirements in federal government contracts.

Over the next year, additional cybersecurity fraud investigations will likely become unsealed as whistleblowers and the government utilize the FCA as a tool to address national security threats and to preserve the public fisc. 

By Jaclyn Tayabji of Tycko & Zavareei LLP

[1] The 2010 amendment to the AKS provides that “a claim that includes items or services resulting from a violation of this section constitutes a false or fraudulent claim for purposes of subchapter III of chapter 37 of title 31 [the FCA].” 42 U.S.C. § 1320a-7b(g) (emphasis added).

[2] 42 F.4th 828 (8th Cir. 2022).

[3] 880 F.3d 89 (3d Cir. 2018).

[4] Pfizer, Inc. v. United States Dep’t of Health and Human Servs., 42 F.4th 67, 74 (2d Cir. 2022), cert. denied sub nom. Pfizer Inc. v. Dep’t of H&HS, No. 22-339, 2023 WL 124415 (U.S. Jan. 9, 2023).

[5] The DOJ’s active Medicare Part C litigation includes: United States ex rel. Ross v. Independent Health Association et al., 1:12-cv-00299 (W.D.N.Y.); United States v. Anthem, Inc., 1:20-cv-2593 (S.D.N.Y.); United States ex rel. Osinek et al. v. Kaiser Permanente, No. 3:13-cv-03891 (N.D. Cal.); United States ex rel. Cutler v. Cigna Corp., No. 3:21-cv-00748 (M.D. Tenn.); United States. ex rel. Poehling v. UnitedHealth Group, Inc. et al., No. 2:16-cv-08697 (C.D. Cal.).