In a pivotal ruling that may reshape the landscape of False Claims Act (“FCA”) litigation, the United States Court of Appeals for the Second Circuit adopted a nuanced interpretation of “willfulness” under the federal Anti-Kickback Statute (“AKS”).

In United States, et al., ex rel. Hart v. McKesson Corp, the Court found that to act willfully, a defendant must have knowledge that their conduct is unlawful, even if the defendant is unaware of the AKS specifically. This means that a defendant must have a “bad purpose” or intent to do something the law forbids, but does not need to be aware of the exact statutory provision being violated. This interpretation aligns with the broader principle in federal criminal law that punishes deliberate and knowingly wrongful conduct, while protecting those who might unintentionally engage in prohibited actions.

In McKesson, the government alleged that McKesson Corp. violated the federal and state AKS by providing customers with free access to valuable business management tools as an inducement to purchase drugs. The district court dismissed the FCA claims, finding that the government failed to allege sufficient facts suggesting McKesson acted with the requisite level of willfulness. The Second Circuit affirmed the dismissal of the federal FCA claims, highlighting the necessity for clear evidence of a defendant’s knowledge of unlawfulness to satisfy the standard of willfulness under the AKS. However, the Second Circuit vacated the district court’s dismissal of the government’s remaining claims under the FCA analogues of several states and D.C., noting that some state anti-kickback laws may have no scienter requirement or a lesser requirement than “willfulness.”  

This decision offers critical insights into the requisite mental state for AKS violations and sets a precedent that could influence both current and future FCA cases. This case also highlights the complexities of navigating the patchwork of federal and state anti-kickback laws, emphasizing the need for robust compliance programs that address both levels of regulation. For a comprehensive understanding of how this ruling may affect your organization and to ensure that your compliance strategies are up to date, we encourage you to consult with our legal experts who are well-versed in the nuances of FCA enforcement and defense.

Note: Our lawyers leveraged AI in creating this blog post, including using a transcript summary created by generative AI. As we explore the potential of generative AI in the legal space, it is our intention and our practice to be transparent with our readers and to showcase the results we are achieving using generative AI with publicly available resources. Crowell’s AI group is comprised of lawyers and professionals across our global offices, including from Crowell & Moring International (CMI), our international public policy entity, with decades of sector-specific experience. We intend to lead by example in our own responsible use of AI, as it pertains to both the risks and benefits. Should you have questions about the use of generative AI in the legal sector or Crowell’s use of AI, please contact innovation@crowell.com.

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Photo of Michelle Chipetine Michelle Chipetine

Michelle Chipetine is a counsel in Crowell & Moring’s New York office and a member of the firm’s Intellectual Property and Health Care groups. Michelle’s practice focuses on patent litigation and representing health care entities and not-for-profit corporations on a wide range of…

Michelle Chipetine is a counsel in Crowell & Moring’s New York office and a member of the firm’s Intellectual Property and Health Care groups. Michelle’s practice focuses on patent litigation and representing health care entities and not-for-profit corporations on a wide range of transactional, corporate, and regulatory matters. Michelle also maintains an active pro bono practice.

Michelle graduated cum laude from Fordham University School of Law, where she was a legal writing and torts teaching assistant and actively involved with Fordham’s Neuroscience and Law Center. During law school, Michelle worked for Mount Sinai Innovation Partners, where she facilitated the transfer and commercialization of technologies developed by Mount Sinai researchers. Michelle also studied neuroscience at Vassar College, where she graduated cum laude.

Photo of Michael Shaheen Michael Shaheen

Michael Shaheen is a partner in the White Collar & Regulatory Enforcement and Health Care groups in the Washington, D.C. office of Crowell & Moring. His practice focuses on federal litigation, investigations, and enforcement actions. Michael has significant experience with the False Claims…

Michael Shaheen is a partner in the White Collar & Regulatory Enforcement and Health Care groups in the Washington, D.C. office of Crowell & Moring. His practice focuses on federal litigation, investigations, and enforcement actions. Michael has significant experience with the False Claims Act (FCA), with particular emphasis on health care fraud.

Before joining Crowell & Moring, Michael served as a Trial Attorney with the Fraud Section of the Department of Justice (DOJ), where his work primarily involved investigating and prosecuting FCA matters. At DOJ, he obtained judgments totaling hundreds of millions of dollars and was involved in the settlement of numerous false claims cases of similar magnitude. Michael served in a variety of roles in these cases, ranging from first-chair trial attorney to lead investigator.

Photo of Spencer Bruck Spencer Bruck

Spencer Bruck is counsel in Crowell & Moring’s Health Care group where he represents clients in litigation, fraud and abuse, and compliance matters. He recently joined the firm from the Office of the New York State Attorney General where he led civil health

Spencer Bruck is counsel in Crowell & Moring’s Health Care group where he represents clients in litigation, fraud and abuse, and compliance matters. He recently joined the firm from the Office of the New York State Attorney General where he led civil health care fraud and qui tam investigations involving managed care organizations, pharmaceutical companies, national pharmacies chains, hospital groups, nursing homes, independent medical groups, and other providers.

These investigations arose under the False Claims Act, Anti-Kickback Statute, Stark Law, the New York State Executive and Social Services laws, and managed care contracts. As part of his investigations, Spencer regularly liaised with CMS, HHS-OIG, DOJ, NYS DOH, NYS OMIG, and the New York State Comptroller. Spencer also negotiated self-disclosures with providers involving the HHS-OIG, the NYS OMIG, and the NYS MFCU protocols.

Spencer’s government experience helps him counsel health care entities on regulatory policy and guidance; represent health care entities responding to government surveys, audits, and investigations; conduct internal investigations or compliance reviews; advise on managed care contracts and reimbursement issues; and assist on administrative applications and matters before regulatory agencies; and represent entities in matters in state and federal courts, and in administrative proceedings.

Spencer also litigates complex commercial disputes federal, state, and arbitral forums with a focus on representing managed care companies.