A federal court recently allowed a plaintiff’s state law negligence claim, which utilized the Anti-Kickback Statute (“AKS”) and federal physician self-referral law (the “Stark Law”) as legal support to survive a motion for summary judgment. In Post v. AmerisourceBergen Corporation, No. 1:19-CV-73 (N.D.W. Va. Nov. 2, 2020), Plaintiff, Frances G. Post, filed suit against Defendants, AmerisourceBergen Corporation, US Bioservices Corporation, I.g.G. of America, Inc., and HIS Acquisition XXX, Inc., alleging negligence claims arising from Plaintiff’s purchase of immunoglobulin (“IVIG”). Facing a motion to dismiss, the court allowed the Plaintiff to utilize these federal fraud and abuse laws to support a state law cause of action.
Plaintiff’s claims revolve around allegations of I.g.G. employees targeting physicians to achieve increased sales of and profits from IVIG, an intravenously administered blood product with the potential for severe side effects that may prevent people from carrying out functions of daily living. Included in the allegations was the assertion that Defendants made payments to Plaintiff’s physician to induced him to “misdiagnose patients and wrongfully disclose sensitive, private, and protected medical information of Plaintiff and other putative class members for the purpose of increasing new-book sales of IVIG, which increased Defendants’ profits.” From these facts, Plaintiff alleged seven claims: negligence, personal injury, civil conspiracy, fraudulent concealment, unjust enrichment, breach of confidentiality, and violation of privacy.
Plaintiff’s use of Defendants’ conduct, as alleged to AKS and Stark Law violations, to support unrelated state law claims, is noteworthy for a claim of action outside of a False Claims Act (“FCA”) action. Many courts, like the federal court applying West Virginia law in Post, allow negligence claims to utilize violations of law to meet elements of the legal claim. Further, if there are injuries like in Post, plaintiffs could similarly allege conduct when a private right of action is not available. The judicial opinion here did not agree with the Defendants’ arguments that this effectively created a private right of action for these fraud of abuse laws that did not exist and is only “enforceable through the qui tam provisions of the [FCA].”) But they were unsuccessful and the court appeared to give weight to Plaintiff’s view that these federal statutes do not prohibit a person from asserting state tort claims based on conduct that results in personal injuries and damages where the conduct may also violate federal regulatory standards or criminal statutes. The court then denied the motion to dismiss the case.
Though not an overwhelmingly common topic in litigation, Plaintiff is not the first to bring state law claims rather than an FCA action for conduct that may have violated AKS or Stark Law. Our review of such cases that unlike in Post most plaintiffs have been unsuccessful. In those case which we discuss examples of below, the AKS and Stark Law violations were the sole basis for making out a state law claim. In Post, by contrast, the court viewed that there was possibly evidence that the inducement led to an improper diagnosis causing the injury and therefore the AKS and the Stark Law were additional support making out elements of the state law claim assisting in demonstrating improper conduct, while alleging other negligent conduct.
Reliable Ambulance Service
In Reliable Ambulance Service, Inc. v. Mercy Hospital of Laredo, No. 04-02-00188-CV (Tex. App. Aug. 20, 2003), damages and injunctive relief were sought based exclusively upon proof that Mercy Hospital’s violation of AKS injured Reliable Ambulance. The state appeal court affirmed summary judgment, holding that allowing a private citizen to assert a claim “based solely” on an alleged violation of the federal criminal statute would be inconsistent with the intent of Congress. As such, plaintiff ultimately failed to state a claim under Texas law. As noted in a footnote to the opinion, the court recognized that other courts have acknowledged the possibility that conduct allegedly violating these federal statutes could form the basis for liability under a state law cause of action. However, as the plaintiff in Reliable Ambulance did not plead any claim in addition to a “generic tort of wrongful competition” based solely on the alleged AKS violation, the court did not fully address when a plaintiff could use alleged AKS and Stark Law violations as a basis for a state law claim where the plaintiff has made out all elements of the state law cause of action.
A federal court came to a similar conclusion in Synthesis (U.S.A.) v. Global Medical, Inc., No. CIV.A. 04-CV-1235 (E.D. Pa. Sept. 14, 2005). In Synthesis, the plaintiff also relied on evidence of AKS violations in an attempt to make out its Pennsylvania state law claim. The Court explicitly noted that the same conduct that is prohibited under the AKS can nevertheless provide a basis for civil liability under another state or federal law. The question was merely whether the conduct violated Pennsylvania state law. The Synthesis Court held that the plaintiff’s claim must be dismissed because it failed to state a claim under Pennsylvania law, because the plaintiff failed to make out each element of the state law cause of action. The court did not dismiss the plaintiff’s case because it believed it to be improper to bring the claim under state law; the case was dismissed because the plaintiff failed to state a claim and sufficiently establish all elements of the state law claim.
Potential Defense Arguments Regarding Contravention of Legislative Intent
Notwithstanding these three cases where courts have appeared to be willing to consider the AKS and the Stark Law used to support state law claims, there still may be a strong argument that this tactic runs flies in the face of legislative intent. This argument was highlighted in Reliable Ambulance, as the court there noted, in determining whether reliance on a federal penal statute as evidence of state law violations contradicted legislative intent as part of that dismissal. Congress has actively regulated this area—providing an explicit private right action, through the FCA (with public disclosure laws), and providing both civil and criminal penalties depending on the circumstances. Similarly, many states have their own comparable state statutes with their own judgments with respect to appropriate remedies and private claims.
Currently, there have not been an abundant number of such cases brought under state law claims, whether for medical malpractice or otherwise. However, should that change and we begin to see more plaintiffs bringing state law claims in reliance on conduct that allegedly violates AKS or Stark Law, this would add one more punishing element in addition to the FCA that must be evaluated for healthcare providers in their fraud and abuse compliance. Such a trend could also change the risk calculation when considering government-approved self-disclosure protocols if such submission could be used by a plaintiff to allege medical malpractice or other state law claims (and potentially argue an admission of guilt) notwithstanding the settlement.