Recently, in United States ex rel. Hart v. McKesson Corp., the Second Circuit clarified the standard for acting “willfully” under the federal anti-kickback statute (AKS).

False Claims Act relator Adam Hart alleged that the defendant violated the AKS by providing business management tools to its customers, without charge, to induce those customers to purchase drugs from them.  The tools helped providers to maximize profits and mitigate the risk that reimbursement rates would fall below the cost of the drugs to them.  One tool, the Margin Analyzer, compared profit margins for drugs considered to be interchangeable, and the second, the Regimen Profiler, provided margin information for an entire course of treatment as opposed to specific drugs.  The unlawful kickback, according to relator, was that the defendant did not offer these tools on a stand-alone basis, but only offered them to providers who agreed to use the defendant as their primary wholesaler of branded and generic drugs.  The defendant allegedly provided the tools as a kickback to induce drug sales. 

The Second Circuit first addressed the proper understanding of “willfulness” under the AKS.  The Court held that, in order to violate the federal AKS, a defendant must act knowing that the conduct is in some way unlawful but does not have to know specifically that the conduct violates the AKS.  The Court stated that this interpretation accords with the general goal of criminal law to punish only those who act with a “vicious will.”  Notably, in 2010, Congress amended the AKS to provide that a violation does not require actual knowledge of the AKS or a specific intent to violate the AKS.  Also, particularly with respect to the analysis of applications of AKS safe harbors to conduct, this interpretation also avoids unfairly sweeping innocent conduct under the reach of the criminal statute.

Next, the Second Circuit addressed the sufficiency of the relator’s allegations on knowledge of wrongful conduct and found them wanting.  The relator alleged that knowledge was sufficiently pled due to destruction of documents, the relator’s own suggestion that the conduct was inappropriate, and an email in which a company employee attached documents and wrote, “You didn’t get this from me … ok?”   The Court found that any destruction of evidence did not show consciousness of illegality at the time of the alleged conduct; the relator’s comments only suggested that he, rather than someone at the defendant, believed the conduct to be wrongful; and the email attached over 170 pages of documents, with only minimal reference to the business management tools at issue.  The Court held the allegations to be insufficient to plausibly suggest that the defendant believed its conduct was unlawful at the time of the alleged offense.  The Court, however, remanded the case to the district court to address whether the conduct could violate state false claims act statutes. 

Alleged violations of the federal AKS are a significant component of many False Claims Act cases.  The Second Circuit’s decision clarifies the standard for “willfulness” under the AKS and provides guidance on how courts should address a relators’ factual allegations on the defendants’ knowledge of wrongdoing.