A Maryland district court adopted a middle of the road approach on causation, rejecting both the defendants’ preferred “but-for” standard and the relator’s “proximate cause” standard. Instead, the court concluded that a relator need only show that an illegal referral sat somewhere in the causal chain between an alleged kickback and a false claim for payment.
United States District Court for the District of Maryland No. 1:17-cv-00668-SAG; U.S. ex rel. Matthew Fitzer v. Allergan Inc.
In Brief
A Maryland court denied Matthew Fitzer’s request for reconsideration of its decision dismissing his third amended complaint alleging that the defendants’ physician locator website induced doctors to use their devices during medical procedures and was therefore an illegal kickback. The relator complained that the court applied an unnecessarily strict presentment standard, but the court again found the complaint failed to alleged when the medical procedures were conducted or when claims were submitted. Without this information, the complaint failed to allege any false claims with particularity and failed to demonstrate a causal link between the alleged kickbacks and tainted claims. The relator also argued the court erroneously required that he prove that the physicians were aware of the kickback scheme, but the court disagreed. Rather, the court concluded that the relator could not show that claims were tainted by kickbacks when he could not prove the physicians even knew they received any improper benefit from the defendants.
Background
Matthew Fitzer’s qui tam complaint alleged that Allergan Inc. and its successor firm conducted an unlawful kickback scheme in violation of the False Claims Act. The defendants are two medical device companies who, at different times, owned the LAP-BAND brand of internal stomach banding devices. The firms separately operated a physician referral website that helps connect prospective patients with local physicians who have experience implanting their medical devices. Fitzer alleged that the defendants’ website database includes only physicians who meet an annual quota for recommending their products. Because the website amounts to free advertising for the physicians, the relator alleged that the quota induced physicians to prescribe the defendants’ products, in order to maintain their placement on the site.
The court previously dismissed Fitzer’s third amended complaint, but granted leave to amend. However, rather than filing a fourth amended complaint, Fitzer has asked the court to reconsider its decision dismissing his complaint. In the alternative, Fitzer requested leave to amend.
The Request for Reconsideration
The relator argued the court erred by applying the wrong standards to the presentment and causation elements. The court acknowledged that the relator had two avenues for pleading his case: 1) allege with particularity that false claims were submitted to the government; or 2) allege sufficient facts to show a pattern of conduct that would have necessarily led to the submission of false claims. The relator argued that he’d met both standards. The court disagreed.
The relator argued that he satisfied the first method because he identified specific providers, the states where they practice, and a count of LAP-BAND procedures per year. However, the court found that none of that data identified a specific false claim for payment. The complaint stated when the physicians accepted the alleged kickbacks, not when claims were submitted. Further, the complaint did not allege which, if any, procedures were reimbursed by government healthcare programs.
The TAC also did not adequately allege that the procedures involved LAP-BAND products, rather than similar devices, nor demonstrate that the identified physicians were not capable of performing procedures with devices other than the LAP-BAND. Even assuming that the relator accurately alleged that there are different requirements for procedure depending on the device manufacturer, the court declined to assume that the named physicians were not qualified to perform surgeries with non-LAP-BAND devices.
For the same reasons, the court held that the relator had not connected the dots between his allegations and the submission of false claims, even without representative examples. Again, the court found the lack of information about when services were provided or when claims were submitted to be fatal to the complaint. The court again declined to accept the relator’s conclusory statements about the existence of false claims.
The Causation Standard
The relator argued that the court erroneously relied on the “particular patient” standard from the Third Circuit’s decision in United States ex rel. Greenfield v. Medco Health Solutions. Second, he argued that the court erroneously found that the complaint failed to allege surgeons’ knowledge of their own locator listings.
First, the court stated that it did not intend to impose the “particular patient” standard as an evidentiary burden, but meant to explain the causation standard in an AKS-based FCA case, and then explain why the TAC did not allege facts that, taken as true, can plausibly meet that standard.
The court previously rejected both parties’ standards. The defendants advocated for a “but-for” cause standard, while the relator argued for a “proximate cause” standard. The court acknowledged that the state of the law on causation is unsettled, but concluded that both sides were wrong. Instead, the court adopted a middle of the road approach, holding that relators need only show that an illegal referral resulted in a claim. As above, the court explained that the relator needed to provide more than conclusory statements to demonstrate that claims, in fact, were submitted.
The court held that the relator did not adequately allege that the purportedly false claims on which he relied were related to LAP-BAND surgeries; did not adequately allege that anyone was subject to an unlawful referral, primarily because he did not provide any temporal information about when any referrals were made, when any procedures took place, or when any claim was submitted; and did not adequately allege that any of the providers listed in the claims tables were aware of the alleged kickback. Without such information, the court could not link the alleged AKS violations to any alleged false claims.
Knowledge of the Kickbacks
Finally, the relator argued that the court erred in finding that he had not adequately alleged the surgeons’ knowledge of their listing in the physician location. The relator said there was no authority requiring a plaintiff-relator to establish non-parties’ knowledge of the scheme for any purpose. Rather, the FCA only requires that defendants know about the fraud.
The court rejected this argument as a mischaracterization of its opinion. The court did not require the relator to demonstrate the surgeons’ knowledge of the scheme. Rather, the court held that the relator did not adequately show that the physicians were aware of the existence of any benefit or kickback at all, regardless of the legality.
The court explained that the causation element requires something more than a showing that a claim was merely “tainted” by an AKS violation but something less than a showing that the provider would not have made the referral but for the kickback. At minimum, that standard requires that a relevant provider be aware of the kickback. Otherwise, there would be no way to show that a claim for reimbursement was induced by an improper kickback.
