On December 27, 2024, the United States Court of Appeals for the Second Circuit decided United States ex rel. Camburn v. Novartis Pharmaceuticals Corporation and joined a growing list of federal circuit courts that have adopted what the Second Circuit called the “at least one purpose rule”. This rule provides that defendants have violated the Anti-Kickback Statute (“AKS”), 42 U.S.C. §1320a-7b so long as at least one purpose of the alleged remuneration at issue (as opposed to the sole or main purpose) was to induce patient referrals, even if there were other, legitimate reasons for the payment.
By way of background, the AKS prohibits the knowing and willful offer or payment of any remuneration to induce or reward patient referrals or the generation of business involving an item or service reimbursable by Federal health care programs. This includes prescriptions for drugs. Remuneration includes anything of value, such that it may constitute hotel stays, meals, or excessive compensation. The False Claims Act (“FCA”) prohibits an individual from knowingly submitting a claim for payment to Federal health care programs that is false or fraudulent. A claim tainted by an AKS violation is a fraudulent claim under the FCA and AKS violations are frequently prosecuted under the FCA.
Relator-Appellant, Steven Camburn (“Camburn”), alleged that Appellee, Novartis Pharmaceuticals Corporation (“Novartis”), violated the FCA by providing improper remuneration to physicians to incentivize their prescribing of Gilenya, a drug to treat multiple sclerosis, in violation of the AKS. Gilenya requires a burdensome six-hour observation for the first dose to the patient as Gilenya can result in a slowed heart rate, dizziness, tiredness, and an irregular heartbeat. To “widen Gilenya’s appeal to the market”, Novartis funded a peer-to-peer speaker program, which Camburn alleged were shams that provided little educational value, such that they were part of a scheme to offer remuneration (e.g., speaker fees and “lavish” and “extravagant” meals) in exchange for physicians writing prescriptions.
The district court dismissed Camburn’s Third Amended Complaint with prejudice for not pleading the existence of a kickback scheme with adequate particularity. The Second Circuit largely affirmed the decision of the district court; however, they vacated and remanded the case regarding three categories of allegations related to Novartis’s speaker programs: “(1) speaker programs with no legitimate attendees; (2) excessive compensation of speakers for canceled events; and (3) the selection and retention of certain speakers deliberately to induce a higher volume of prescriptions of Gilenya.” In returning the case to the district court, the Second Court adopted and applied the at least one purpose rule.
FCA claims require that the facts constituting fraud must be plead with particularity, such that the facts must give rise to a strong inference of fraudulent intent. The Second Circuit held that the allegations related to the three categories delineated above create a strong inference that at least one purpose of Novartis’s conduct was to induce fraud. While there may have been other reasons for Novartis’s efforts, the Second Circuit held that Camburn only needed to allege that at least one purpose of the remuneration to physicians was to induce prescribing Gilenya without requiring the relator to state a quid pro quo relationship (or, cause and effect relationship) between payments and prescribing. The Court found that Camburn provided sufficient examples in these categories to meet this standard.
Camburn allegations the Court believed were enough to plead an AKS violation included:
- Certain physicians attended speaker events despite already being familiar with Gilenya and at expensive and high-end restaurants that may not have been appropriate for educational events;
- Camburn named three physicians that Novartis paid approximately $20,000 for canceled events, where those same physicians had claims submitted of up to $1.7 million; and
- Novartis selected certain physicians because they would not prescribe Gilenya without paid speaking engagements or because they were likely to write a large volume of prescriptions of Gilenya if provided such engagements.
The Court noted these alleged facts were “enough particularity to give rise to a strong inference that the payments constituted, at least in part, unlawful remuneration.” The Second Circuit ruled that this was sufficient to support a claim for an AKS violation at the motion to dismiss phase.
With this decision, the Second Circuit joins the Third, Fifth, Seventh, Ninth, and Tenth Circuits in adopting the at least one purpose rule: United States v. Borrasi, 639 F.3d 774 (7th Cir. 2011); United States v. McClatchey, 217 F.3d 823 (10th Cir. 2000); United States v. Davis, 132 F.3d 1092 (5th Cir. 1998); United States v. Kats, 871 F.2d 105 (9th Cir. 1989); and United States v. Greber, 760 F.2d 68 (3rd Cir. 1985). Additionally, the United States Department of Health and Human Services Office of Inspector General relies on this same rule, which it refers to as the “one purpose test,” in its advisory opinions as seen most recently in OIG Advisory Opinion No. 24-13 (December 26, 2024). As well, both the First and Fourth Circuits have assumed this rule or test to be the law. See United States v. Mallory, 988 F.3d 730 (4th Cir. 2021); Guilfoile v. Shields, 913 F.3d 178 (1st Cir. 2019).
As the at least one purpose rule continues to be adopted by more courts interpreting alleged AKS violations, defendants will continue to be put on the defensive regarding the validity of their payments to providers. That said, FCA claims predicated on AKS violations have other requirements that whistleblowers and prosecutors must satisfy, including demonstrating knowing and willful misconduct and causation, and targets of investigations and enforcement actions may also be able to rely on the application of the relevant safe harbors in defending their payments to physicians.
The authors of this article and other healthcare regulatory and enforcement attorneys at McGuireWoods are available to discuss concerns clients may have regarding their payments to providers.