This is the first in our 2025 Year in Preview series examining important trends in white collar law and investigations in the coming year. Up next: anti-corruption enforcement.
We kick off our annual Year in Preview series with a comprehensive look at health care fraud enforcement in 2025. This post proceeds in three parts. First, we explore what the second Trump administration might bring, looking at enforcement metrics from Trump’s first presidency while examining the priorities we might expect from the current nominees to key health care agencies. Second, we look at the hot spots – enforcement targets that, year after year, receive government scrutiny and fill the pages of DOJ press releases. Third, we look at the courts, recapping significant acquittals and tracking key appeals that may shape health care fraud laws for years to come.
I. Enforcement under the Second Trump Administration
As we close out the Biden presidency and head into the second Trump term, change is expected across the federal government. This includes a host of high-profile nominees to health care departments and agencies. However, it is unclear what their impact will be on areas of traditional health care fraud enforcement – nor should it be assumed that those nominees, if confirmed, are fully aligned on their priorities in this space. If past is prologue, we should expect continued focus on health care fraud, the single largest driver of the federal government’s recovery in the first Trump presidency, at levels largely aligned with what we’ve seen in the intervening four years.
By the Numbers
In terms of dollars recovered by the federal government in health care fraud matters, the data from the first Trump administration is in line with figures seen during the Biden administration.
Based on False Claims Act (FCA) data published annually by the Department of Justice (“DOJ”), the recoveries are roughly comparable. Under Trump, in 2017, the federal government recovered $2.4 billion in settlements and judgments involving the health care industry (of $3.7 billion total); in 2018, $2.5 billion involved the health care industry (of $2.8 billion total); in 2019, $2.6 billion involved the health care industry (of $3.0 billion total); and, in 2020, $1.8 billion involved the health care industry (of $2.2 billion total).
By comparison, under Biden, in 2021, the federal government recovered $5.0 billion in settlements and judgments involving the health care industry, of which $2.8 billion was attributable to one opioid-related settlement (of $5.6 billion total); in 2022, $1.7 billion involved the health care industry (of $2.2 billion total); and in 2023, $1.8 billion involved the health care industry (of $2.68 billion total). As of the date of this publication, 2024 data had not yet been released. Adjusting for the 2021 opioid settlement, these annual recoveries all fall within a range from $1.7 billion to $2.6 billion, and the particular administration does not appear to drive the scale of recovery. We will look to see whether recoveries going forward depart from this range and, if so, what might be driving any changes.
Importantly, FCA settlements are often years in the making and, therefore, are typically less impacted by changes in DOJ leadership. However, the incoming administration has expressed its intent to have more hands-on control from a central DOJ in Washington over the actions of the United States Attorney’s Office. In theory, this could extend to more oversight and shaping of FCA resolutions, particularly regarding the settlement figures (as opposed to whether DOJ should pursue particular settlements).
The Nominees Speak (or Spoke)
While the data above indicates a relatively steady state for health care fraud enforcement activity between the Trump administration in 2017-2020 and the subsequent Biden administration, the current slate of nominees may be reason to expect more significant changes. That said, it is not always clear in what direction these individuals would move their respective departments and agencies – and in some instances, tensions among the nominees’ positions make the predictive exercise even less certain.
One of the most significant nominees is Dr. Mehmet Oz, the nominated Administrator for the Centers for Medicare and Medicaid Services (“CMS”). Oz has previously called traditional Medicare “highly dysfunctional.” In an editorial for Forbes co-authored with the former CEO of Kaiser Permanente, Oz articulated his strong support for the Medicare Advantage program run with commercial insurers, going so far as to title the article “Medicare Advantage For All Can Save Our Health-Care System” and to propose a 20 percent payroll tax (split evenly between employer and employee) to cover the expansion of Medicare Advantage. That Oz now oversees the program he proposed to eliminate would suggest a likely attempt to reduce the import and scope of traditional Medicare. Beyond his support for Medicare Advantage and antipathy for traditional Medicare, Oz’s nomination will likely also focus on his investments, many of which were disclosed as part of his 2022 Senate candidacy in Pennsylvania. These include substantial investments in insurer UnitedHealth Group and investments in the pharmaceutical, agricultural, and fast-food industries, potential points of tension with the expressed views of fellow nominee Robert F. Kennedy. Historically, Oz reportedly received more than $1.25 million in fees for serving as a speaker for device manufacturers.
At the Justice Department, Attorney General nominee Pamela Bondi presents a slightly more traditional background, insofar as she was formerly Attorney General for the State of Florida and in that role, oversaw various recoveries by the Medicare and Medicaid fraud units. Bondi’s office was also among the first in the country to affirmatively move to dismiss an FCA action after declining to intervene, a practice that was officially embraced by DOJ in the first Trump administration in a memo issued January 10, 2018 (the Granston Memo). As always with the Department of Justice, we will watch closely not only the nomination for Attorney General but the appointment of a Deputy Attorney General, perhaps the individual most likely to impact federal policy and practice for prosecutors across the districts.
The expected impact of other significant health care nominees in the enforcement space is less clear. That includes Robert F. Kennedy Jr., nominated as Secretary of the Department of Health and Human Services (“HHS”). Kennedy is perhaps most associated with vaccine skepticism/denialism, in particular, his belief in a causal link between vaccination and autism. In the weeks since his nomination, however, much of the attention has focused on his views about food safety. Kennedy has commented, “The food industry and big agriculture producers control the FDA, and so they're not worried about public health; they're worried about advancing the mercantile interests of those corporations.” He said that “FDA’s war on public health is about to end” and that he has been nominated expressly to root out “corruption and conflicts at the agencies,” a seeming reference to pharmaceutical industry influence and a perceived revolving door between government and industry. On these issues and others – like stem cells – Kennedy would be expected to adopt a more aggressive approach than past administrations, though details on the actual execution of that approach are still outstanding. Equally unclear is where Kennedy falls on other issues within the purview of HHS – including key legislation like the Affordable Care Act. Likewise, Kennedy’s views about the work of CMS, another agency that would report to him, are unknown. In this regard, his impact on that regulatory regime remains to be seen.
Meanwhile, Dr. Marty Makary is nominated as Commissioner for the FDA. Makary, a surgeon and professor at Johns Hopkins, brings to bear some recurring hallmarks of these health care nominees (i.e., a critique of the government’s response to COVID-19). Makary has critiqued the FDA for relying on misleading data in connection with certain opioids; what this means for purposes of regulatory approval if he is nominated is the question, with many expecting this to play out in connection with medication abortion.
Rarely are nominees so high-profile and prolific in their public statements before nomination. It will be interesting to see whether these individuals, if confirmed, adopt policy positions in line with what previously were personal position statements, or whether they are ultimately more constrained by their offices and the system of government and rulemaking in which they now operate.
II. The Classics: Priority Areas in Health Care Fraud Enforcement
Even with a new administration and potentially shifting priorities, certain areas have long been – and will remain – hot spots for health care fraud enforcement. Enforcement targets change over time (e.g., patient assistance programs no longer receive the attention they used to), but the areas below are not coming off the government’s radar anytime soon.
Labs
Clinical laboratories are a common target for health care fraud enforcement. The government scrutinizes diagnostic and genetic testing labs for allegedly medically unnecessary testing, incorrect or duplicative billing codes, improper referrals from health care providers, and other conduct. New technology that many labs rely on often outpaces regulatory guidance and is not fully understood by federal law enforcement, increasing risks for lab companies.
In the final months of 2024, the government announced (1) a $7.2 million settlement in September by an Indiana hospital, its clinical laboratory, and various individuals to resolve alleged FCA violations based on testing – billed to Medicare, Kentucky Medicaid, and TRICARE – that the government contended was medically unnecessary or done in violation of the AKS because it was not used for medical diagnosis or treatment; and (2) health care fraud and other charges in November against the owner of a Texas laboratory for allegedly causing BioDX Labs LLC to submit more than $79 million in fraudulent claims to Medicare and Texas Medicaid for respiratory pathogen panel tests that were not provided and were not medically necessary.
Within the first few days of 2025, there were more health care fraud resolutions involving labs, namely (1) an FCA settlement in Tennessee by LabCorp entities and University Health System, Inc. for allegedly delaying the submission of physician orders for lab tests by Caris Life Sciences, Inc. to circumvent Medicare’s “14-Day Rule” (requiring that tests performed within 14 days after a patient’s discharge be billed to the hospital); and (2) a settlement by Florida-based Physicians Toxicology Laboratory, LLC, an affiliated entity, and a few individuals to resolve alleged FCA violations in connection with orders of urine drug and hormone tests paid for by Medicare. We will continue to see labs in the government’s crosshairs throughout 2025.
Durable Medical Equipment (DME)
Medicare payments for DME and related medical supplies exceed $7 billion annually. The government invests in controls and enforcement to stop alleged DME fraud, often involving billing, coding, medical necessity, and alleged kickbacks. In the summer of 2024, the U.S. Department of Health and Human Services, Office of the Inspector General (“HHS-OIG”), announced that it would undertake multiple reviews regarding current DME fraud schemes and safeguards. These reviews will examine issues related to billing and overlapping claims, and the findings are expected to be released sometime in 2025. Enforcement against DME suppliers will surely continue, and the findings by HHS-OIG may affect the aspects of DME sales most likely to draw scrutiny going forward.
Telemedicine and Digital Health
Telemedicine and digital health have been expanding in recent years, and the government is closely watching the industry as a new target for health care fraud. In 2024, Attorney General Merrick Garland said that “addressing the rise of schemes that exploit telemedicine technology” was a DOJ priority, as he announced charges against Done Global, Inc. executives for their alleged role in a $100 million scheme using telemedicine providers to prescribe more than 40 million Adderall pills and other stimulants to patients with no medical need for the drugs. Remote prescribing arrangements likely will not be the only fraud target in this space as digital health delivery models become more widely adopted and begin to benefit from government payment. We have already entered a new frontier in behavioral health: based on a CMS rule finalized last year, as of January 1, 2025, Medicare coverage became available for certain mental health apps authorized by the Food and Drug Administration. Even with the coming shake-up in DOJ, we expect the government to continue and perhaps expand its enforcement efforts as it tries to keep pace with the rapidly growing remote care industry.
Pharma
DOJ continues to enforce the AKS against pharmaceutical companies and distributors, with settlements for violations totaling hundreds of millions of dollars. Enforcement in the area is unlikely to slow.
In October 2024, the United States obtained a $450 million settlement from Teva Pharmaceuticals USA Inc. and Teva Neuroscience, Inc. (“Teva”) to resolve allegations that it used charities that help cover Medicare patients’ out-of-pocket drug costs to pay kickbacks and boost sales of its multiple sclerosis drug Copaxone.[1] The government alleged that Teva, the largest generic drug manufacturer in the United States, coordinated and conspired with two copay assistance foundations to ensure that purported donations to the foundations were used to specifically cover the copays of Medicare Copaxone patients. It allegedly engaged in this scheme for over ten years while steadily raising the drug’s price. The government’s settlement with Teva is the largest settlement of an AKS violation stemming from the alleged use of third-party foundations as conduits to pay patient copays.
Since 2017, the United States has collected over $1 billion in similar alleged schemes, and the HHS-OIG has stated that it “remains committed to thoroughly pursuing allegations of price fixing and kickbacks that put the Medicare program at risk.” Notably, FCA actions targeting patient assistance programs were largely government-driven and not the result of relator-filed qui tam actions. This matters because government-driven FCA enforcement trends may slow (or even stop) as the enforcement priorities shift. Enforcement in this area could slow because DOJ’s apparent message to the industry through litigation has likely impacted how patient assistance programs are established and operated. Companies with patient assistance programs closely watch these litigations and adjust their programs to reduce risk.
Shortly after the Teva settlement, in December 2024, ASD Specialty Health Care LLC, doing business as Bessee Medical, agreed to pay $1.67 million to settle allegations that it violated the AKS and FCA by providing inventory management systems to retina practices at no cost to induce them to purchase neovascular age-related macular degeneration (wet AMD) drugs from Besse. The settlement resolved claims brought by two individual whistleblowers, who will receive roughly a quarter million dollars from the proceeds of the settlement.
Pharmacy Benefit Managers
Pharmacy benefit managers (“PBMs”) have been the subject of scrutiny and bipartisan reform efforts for the past several years due partly to their drug rebate programs. Often described as “middlemen” in the pharmaceutical industry, PBMs negotiate drug costs with pharmacies and drug manufacturers, create drug tiers, and set reimbursement rates. When manufacturers offer large rebates, PBMs will include the manufacturers’ drugs in their formularies and put them in more favorable insurance tiers. Per the PBM tiering decisions, pharmacists then charge patients the amounts that PBMs reflect are owed, and bill health plans to cover the remaining costs. The PBMs determine how much to reimburse the pharmacies and how much to charge patient health insurers for sales. Months later, when drug manufacturers submit the rebates to the PBMs to be passed along to the health insurers, PBMs receive a portion as a fee for their services.
This system raised the ire of Congress, which included several PBM reforms in the original stopgap funding bill blocked by the incoming Trump administration at the end of December 2024. Although the administration declined to support the PBM reforms contained in the bill, in a December 13, 2024 press conference, President-elect Trump referred to PBMs as “horrible middlem[e]n . . . We’re going to knock out the middleman. We’re going to get drug costs down at levels that nobody has ever seen before.” Shortly thereafter, on December 31, 2024, Elon Musk, tapped to head the forthcoming Department of Government Efficiency, tweeted, “What is a ‘pharmacy benefit manager?’” What the administration does, if anything, remains to be seen, but we expect PBM reform and enforcement activity to remain an issue in 2025. Indeed, this is some precedent here: in 2020, the Trump administration sought to make rebates to Medicare Part D plan sponsors and their PBMs illegal by removing the safe harbor protection that shields these rebates from the federal anti-kickback laws, in a rule delayed by the Biden administration until 2023 and then delayed again by Congress until 2032. Many states, including Massachusetts, have also expressed their interest in so-called PBM reform.
Should significant changes occur in the next year, manufacturers will face challenges adjusting their business practices to ensure compliance with the AKS.
Payors
Medicare advantage is front and center on enforcers’ minds. HHS-OIG is paying close attention to alleged AKS violations arising from marketing arrangements related to the Medicare Advantage Program and providers. On December 11, 2024, the OIG office issued a Special Fraud Alert focused on two types of arrangements that implicate the AKS: (1) payments from Medicare Advantage organizations, agents, brokers, and other health care professionals in exchange for patient referrals to certain Medicare Advantage plans; and (2) payments from health care professionals to agents, brokers, or others in exchange for Medicare enrollee referrals to particular health care professionals. The OIG noted that these arrangements may result in the exact harm that the AKS is designed to protect – that is, unfair competition and improper steering of Medicare enrollees to plans or providers based on lucrative incentives rather than the best interest of the enrollee.
Because the OIG has issued only six Special Fraud Alerts in the past twenty years, this alert may help predict where the OIG and DOJ will be focusing their attention in the coming months and years. Recently, Oak Street Health agreed to pay $60 million to settle allegations that it paid referrals to insurance agents to direct Medicare Advantage-eligible patients to Oak Street Health’s primary care clinics. This is likely just one of many enforcement actions to come related to patient choice. To that end, the OIG’s Special Fraud Alert contains a list of “Suspect Characteristics,” indicating that a marketing arrangement may violate the AKS. Parties to any such arrangements should study them carefully. Historically, prosecutions and FCA actions related to special fraud alerts become more aggressive over time, and enforcement often spreads beyond the obvious players into the fringes. For example, telemedicine enforcement moved over time from marketers and pharmacies purportedly central to the illegal schemes and, instead, began to target those further removed, such as technology platform owners and other non-providers. As enforcers run to participate in the Medicare Advantage space it will be important to follow how far afield they intend to stretch.
III. Health Care Fraud Law in the Courts
Noteworthy Acquittals
2024 was an important reminder that sometimes cases need to be tried. This is particularly true in the fraud context, where the government continues to make aggressive charging decisions – these must be tested at the motion stage, at trial, and, when appropriate, on appeal. Fraud cases, particularly health care fraud cases, often turn on fact-based questions of intent best evaluated by a jury of one’s peers. The government suffered several fraud trial acquittals in 2024.
By way of background, trials historically favor the government, and only a small percentage of defendants choose to proceed to trial. In FY 2023 (the last year data was available), for example, only 2.5% of all federal defendants proceeded to trial.[2] Of that small group, 85% were convicted.[3]
Fraud cases typically proceed to trial more often than the average criminal case. In 2023, nearly 5% of fraud defendants proceeded to trial – nearly double the overall percentage. Fraud defendants fare slightly better at trial than the average with an acquittal rate in 2023 of nearly 17% (compared to ~15% overall). The percentage of fraud acquittals has risen over the past ten years:
Acquittal rates vary by jurisdiction. District-level offense-type data is not available; however, it is possible to review the overall trial acquittal rate by district for all types of offenses. The overall acquittal rate varies widely by jurisdiction. In FY 2023, for example:
Here are a few noteworthy not-guilty verdicts in 2024 that were delivered in health care fraud cases:
United States v. Jeffrey Andrews, et. al., 2:20-cr-00578
In July 2020, a grand jury in the District of New Jersey returned a sprawling 15-count indictment against Jeffrey Andrews, Chad Beene, Adam Brosius, and Robert Schneiderman. The indictment alleged that the defendants conspired to, and did, commit health care fraud and AKS violations against the government through a scheme in which they obtained medically unnecessary prescriptions for expensive topical creams, which they then billed to TRICARE, Medicare, and commercial payors for reimbursement. The government has pursued many of these alleged TRICARE compound schemes around the country.
Three defendants, Jeffrey Andrews, Adam Brosius, and Robert Schneiderman pled guilty. Only Chad Beene elected to test the government’s case at trial – and notwithstanding his co-defendants’ guilty pleas and cooperation – he won.
On October 28, 2024, Beene’s jury trial began in Newark. Both Brosius and Schneiderman testified for the government. According to the government, “[t]he trial was lengthy and complex, spanning approximately three weeks, involving approximately 30 witnesses and hundreds of documents and exhibits.” On November 22, 2024, the jury found Chad Beene not guilty on six counts of health care fraud and deadlocked on both conspiracy counts and all the AKS counts. It remains possible the government will try again at a second trial on the deadlocked conspiracy and AKS counts.
Based on a review of the docket, Beene’s defense attacked the prosecution and the proof against him. Beene argued, among other things, that when he discovered a provider was not signing prescriptions, Beene rejected the behavior and suggested a civil suit against the doctor. According to one filing “[a]t best, what the government has shown in this case is that Mr. Beene was negligent in not following up on perceived problems, many instances of which came up during trial.”
This appears to have been an aggressive prosecution. Beene was not a medical provider and, according to documents filed in the case, had no specialized health care training. Despite that, he was charged as a member of a conspiracy involving the submission of supposedly false claims for allegedly unnecessary prescriptions. This acquittal demonstrates that there is some limit to the government’s ability to hold non-medical professionals responsible for the actions of medical professionals. Many or most TRICARE compound fraud prosecutions have resulted in guilty pleas, but this is another example of a jury rejecting the government theories of criminality – particularly when applied to a non-medical professional.
Interestingly, the grand jury in Newark returned the indictment in this case only months before the Mattia indictment (discussed below), which another judge dismissed as legally insufficient, and the two indictments include similar allegations and theories of culpability.
United States v. Zarobkiewicz et al., 5:22-cr-659
On August 19, 2024, a jury in the San Antonio Division of the Western District of Texas acquitted Kuba Zarobkiewicz and Anthony Fermin of all charges stemming from a sixteen-count superseding indictment.
According to that indictment, Zarobkiewicz and Fermin owned and operated multiple pharmacy businesses, and Mirza owned and operated telemarking companies. Similar to the TRICARE compound fraud scheme alleged in Jeffrey Andrews (above), the government alleged that the defendants conspired to pay bribes to Mirza’s telemedicine company in exchange for signed prescriptions and durable medical equipment (DME) orders being sent to Zarobkiewicz and Fermin’s pharmacies. The government alleged that the prescriptions and DME were medically unnecessary. Mirza pleaded guilty, but co-defendants Zarobkiewicz and Fermin chose a trial. The jury spent three days deliberating before returning a not-guilty verdict.
United States v. Muhamad Aly Rifai, 5:22-cr-390
In May 2024, a jury in the Eastern District of Pennsylvania acquitted a psychiatrist of health care fraud. According to the indictment, Dr. Muhamad Aly Rifai, who practiced largely by telemedicine, allegedly billed Medicare (1) for services not provided, (2) for services purportedly provided but to patients who were deceased, and (3) for a volume of services that could not have been provided in a given day. The defendant elected to proceed to trial and, following an 8-day trial, the jury returned a verdict of not guilty on all counts.
A few things to note about the government’s trial strategy. Interestingly, the government presented two FCA whistleblowers as trial witnesses. This is a risky strategy for the government because it allows the defense, as happened here, to attack their credibility as interested parties hoping to receive a financial payout and to accuse the government of confirmation bias – investigating and charging the defendant based on the whistleblowers allegations but not based on the evidence. The government also provided one of the whistleblowers with immunity and she testified about her immunity agreement. Immunity is always risky for the government, and it needs to be carefully vetted before it is provided. At a minimum, the government should first understand what crime(s) the immunized witness believes they need protection from prosecution. Here, the immunized witness was asked this seemingly basic question on cross examination. In a worst-case scenario answer for the government, the immunized witness said she had not done anything wrong, and worse for the government, she had not done anything wrong with or at the direction of the defendant. It is somewhat surprising to see this response from the immunized witness on the stand and in front of the jury.
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There is no single reason juries found these individuals not guilty. Each case is different and driven by unique facts, circumstances, and legal strategies. Most triable cases involve questions of intent versus questions about what happened. Health care fraud prosecutions rise and fall based on the government’s ability to prove bad intent and the defendant’s success at poking holes in that proof and/or presenting their own evidence of lawful intent. Just because most fraud cases end in guilty pleas does not mean every fraud case must. Like in 2024, we will continue seeing health care fraud cases tried to verdicts (including acquittals) in 2025.
Important Health Care Fraud Cases on Appeal
Additionally, in 2025, there are several cases and opinions to pay attention to as they will have some bearing on the reach of federal health care fraud laws, including the Anti-Kickback Statute.
Two of these cases are wire fraud cases arising from the Third Circuit.
Kousisis v. United States, 23-cr-909
The Supreme Court heard oral arguments in Kousisis on December 9, 2024. The case is on appeal following a jury’s conviction of defendants for conspiracy to commit wire fraud (18 U.S.C. § 1349) and wire fraud (18 U.S.C. § 1343), among other things.
The government alleged that the defendants conspired to defraud, and did defraud, the U.S. Department of Transportation and the Pennsylvania Department of Transportation by skirting the disadvantaged business enterprise (“DBE”) requirements – intended to promote the participation of socially and economically disadvantaged individuals – in the contracts the defendants were awarded. Although the contracted-for work was completed, the defendants received millions of dollars that would not have been paid had the government known the defendants did not satisfy the DBE requirements. The government argued that the defendants defrauded the government because they were induced into providing the grants based on fraudulent misrepresentations that the applicants satisfied the DBE requirements. The government argued that they would not have paid the defendants had they known they did not satisfy those requirements.
The defendants argued that the government’s “fraudulent inducement” theory required a showing that they schemed to harm the government financially. Here, the defendants argued that the government received the full benefit of the bargain because the work was completed. The Third Circuit rejected that argument, stating that the DBE requirement was an essential part of the contract.
At oral arguments before the Supreme Court, some of the justices expressed skepticism at the defendants’ argument that it is necessary to show financial harm to convict for wire fraud by pointing to the lack of statutory support for that argument. Other justices questioned whether the defendants’ argument failed if the Pennsylvania Department of Transportation paid more for the DBE contract (the government conceded that it did not know if this was the case). The defendants countered that the government’s fraudulent inducement theory would impermissibly stretch the fraud statutes to concert into a federal felony offense almost any conduct, including mere puffery and other statements made during ordinary business transactions. All the justices questioned how thin the line was before an action constitutes fraud. One demonstrative example explored at oral argument questioned whether it would be wire fraud if someone wanted to hire a babysitter of a particular faith and hired a teenage babysitter because the babysitter claimed to be a member of the particular religion but it turned out that was not true. Even though the babysitter took great care of the child and performed perfectly, the Court wondered whether this apparent misrepresentation would convert the babysitter’s actions into a federal felony. The answer would seemingly be yes – if the government’s fraudulent inducement theory is correct, this conduct would potentially be criminal. This is an ever-present question that makes this case a significant one.
The Supreme Court’s decision in Kousis will be one to watch in 2025 for its likely impact on health care fraud cases. The government often relies on the fraudulent inducement theory in health care fraud prosecutions and FCA actions.
United States v. Porat, No. 22-cr-1560
The Third Circuit also recently addressed whether the government must establish “convergence” (i.e., that the defrauded party itself – rather than some third party – was deceived) to obtain a conviction of wire fraud. The convergence defense is that fraudulent misrepresentations or similar fraudulent conduct must be directed at the party from whom financial benefits are being taken. It’s a defense that is often raised but rarely prevails.
In Porat, a former dean of the Fox School of Business at Temple University was convicted of conspiracy to commit wire fraud (18 U.S.C. § 1349) and wire fraud (18 U.S.C. § 1343) after submitting fake data to several academic ranking services such as the U.S. News & World Reports to inflate the school’s national rankings. As a result, the school saw a surge in enrollment and received almost $40 million in tuition payments. The government alleged that because of this scheme, applicants, students, and donors of the school were defrauded under false pretenses.
On appeal from the defendant’s conviction, the Third Circuit rejected defendant’s argument that the government had to prove that the defendant defrauded the victims directly through his own conduct, and that it was insufficient to show that he defrauded the third-party academic ranking services. Looking to the text of the statute, the Third Circuit held that the wire fraud statute does not require “convergence.” The Third Circuit stated that even if the statute did require the government to prove convergence, the evidence at trial showed that the defendant directly deceived students and recruiters through his email and marketing campaigns.
The defendant has petitioned for certiorari, so the Supreme Court might weigh in on this issue. However, to date, almost all circuits have rejected the convergence defense. The Ninth Circuit has ruled that convergence is an element the government must prove for wire fraud, see United States v. Lew, 875 F.2d 291, 221-22 (9th Cir. 1989), while the D.C. Circuit had held that the need to show convergence is case-dependent. See United States v. Abou-Khatwa, 40 F.4th 666, 675 (D.C. Cir. 2022). The Supreme Court might therefore decline to address this issue, at least for now.
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Although, factually, these cases have no relation to federal health care fraud, they will be important for the existential question of what constitutes fraud. First, in essentially every case involving the AKS, the government argues that providing a kickback automatically makes a claim false, even if the care itself was medically necessary – thus the government received the benefit of the bargain notwithstanding the illegal kickback. Second, a recognition that convergence is a necessary element for fraud will necessarily impact the health care fraud statutes, which have an “intent to defraud” element but not a requirement that the defendant’s conduct must be directly defraud the government. A Supreme Court decision in Kousisis or Porat would impact the way that the government prosecutes, and defense attorneys defend, health care fraud cases.
There are more cases to watch even still. One such case, United States v. Sorenson, No. 24-1557 (7th Cir.), addresses the impact of the Anti-Kickback Statute on marketing services or relationships. A three-judge panel heard oral arguments on December 4, 2024. The resulting decision may have widespread impacts on what is considered a “referral” under the AKS. The defendant was convicted for providing kickbacks to physicians in violation of the AKS, 42 U.S.C. § 1320a-7b(b)(2). Specifically, the government alleged that defendant paid marketing companies to find patients that needed orthopedic braces and then contact those patients’ providers to induce them to order orthopedic braces that were later fulfilled by the defendant’s company. The defendant argued that the arrangement was legal under Department of Health and Human Service guidance and that he did not fall within the scope of the statue because he was not a health care provider. The government disagreed. The government argued that the text of the AKS refers to “any person” not just health care providers. The government also argued that the defendant created an illegal referral when he paid the marketing companies to directly leverage their influence over medical decisions that are otherwise under a patient’s right to choose. How the court decides will ultimately narrow or broaden the circumstances that constitute a “referral” under the AKS.
In 2025, the courts continue to debate the pleading standard required to survive a motion to dismiss under Rule 9(b) of the Federal Rules of Civil Procedure. In 2022, Novartis won the dismissal with prejudice of a relator’s third amended complaint in the Southern District of New York. The complaint alleged that Novartis engaged in a nationwide kickback scheme that induced providers to prescribe its multiple sclerosis drug, Gilenya, through speaker events as well as other promotional and educational events. However, in a bad start to the new year, the Second Circuit reversed the district court’s decision in US ex. Rel. Steven M. Camburn, et. al. v. Novartis Pharmaceutical Corporation, No. 22-2708 (2d Cir. Dec. 27, 2024). The Second Circuit held that “a plaintiff adequately pleads an Anti-Kickback Statute (‘AKS’), 42 U.S.C. § 1320a-7b, violation when she states with the requisite particularity that at least one purpose of the alleged scheme was to induce fraudulent conduct (the ‘at-least-one-purpose’ rule).” While this decision follows the direction that many other circuits have taken, this is the first decision of its kind in the Second Circuit. However, the Second Circuit did not stop there. The court further held that “as a corollary, a plaintiff pleading an AKS violation as a predicate to an FCA claim need not state a quid pro quo exchange.” This decision has ultimately changed the pleading standards in the Second Circuit, making it much easier than before for plaintiffs to assert fraudulent intent under Federal Rules of Civil Procedure Rule 9(b) in health care fraud cases.
On the other hand, currently before the US Court of Appeals for the First Circuit is U.S. v. Regeneron Pharmaceuticals, Inc., No. 23-2086,[4] a major FCA case that has the potential to further a circuit split over the interpretation of the FCA’s causation element in cases where a violation of the AKS is a predicate violation for a false claim. Defendant Regeneron is accused of paying a charity to reimburse patients’ Medicare copays for one of its drugs – an allegation not dissimilar to the one at the heart of the government’s recent settlement with Teva, discussed above. Regeneron argues that the First Circuit should uphold the district court’s decision requiring but-for causation, follow the Sixth and Eighth Circuits, and apply a restrictive “but-for” causation standard, which would require the government to prove that “but for” the unlawful remuneration in violation of the AKS, the false claims would not have been submitted.
The dispute centers on the definition of “resulting from” as used in the AKS. The government and relators argue for a lax standard to prove a claim to the government results from a kickback whereas defendants, and at least two District Judges in Massachusetts, take the position that the plaintiff must prove but-for the kickback a claim would not have resulted. Regeneron cites United States ex rel. Cairns v. D.S. Med. LLC, 42 F.4th 828 (8th Cir. 2022) and United States ex rel. Martin v. Hathaway, 63 F. 4th 1043 (6th Cir. 2023) to support its theory. If the First Circuit declines to apply the but-for standard, it would align itself with the Third Circuit, which applies a more plaintiff-friendly standard, requiring only that the government demonstrate “some connection between a kickback and subsequent reimbursement claim.” Greenfield v. Medco Health Sols. Inc., 880 F.3d 89, 100 (3d Cir. 2018). Relators and the DOJ in the First Circuit, particularly Massachusetts, are very active in the FCA space and the First Circuit’s decision in Regeneron could have broad implications on the volume and type of cases filed there. Foley Hoag’s White Collar Law and Investigations Blog recently wrote about this topic. (Stay tuned for our upcoming False Claims Act Year in Review for much more on this and other FCA topics.)
On appeal in the Third Circuit is a case likely to influence the pleading requirements for health care fraud claims under § 18 U.S.C. 1347 and 18 U.S.C. § 1349 for false and misleading claims in 2025. In US v. Carmine Mattia, Jr., No. 24-2589, defendant Carmine Mattia, an employee of a telecommunications company and a sales representative for various compounding pharmacies, allegedly bribed a colleague into obtaining “medically unnecessary” compounded medications so that Mattia would receive commissions for the sales. The government’s superseding indictment alleges that Mattia secured the signature of a doctor on prescription forms for the colleague, despite the absence of a doctor/patient relationship between the colleague and the doctor. A health plan was then billed for these “medically unnecessary” medications while Mattia received a cut of the sales. Specifically, Mattia was charged with “knowingly and intentionally conspir[ing] and agree[ing] with others to knowingly and willfully execute a scheme and artifice to defraud a health care benefit program” by causing “false and fraudulent insurance claims” to be submitted to a health care plan for “medically unnecessary” medications in violation of 18 U.S.C. § 1349 and 18 U.S.C. § 1347.
Mattia moved to dismiss the health care fraud claims, arguing that the government failed to properly allege a false or misrepresentative statement made by him to satisfy the pleading standard for health care fraud. He also challenged the term “medically unnecessary” as unconstitutionally vague. In a somewhat rare turn of events, the district court granted his motion based on the insufficiency of the superseding indictment. The court held that to prove a violation of § 1349, which prohibits attempting or conspiring to commit health care fraud, “‘the government must show (1) a conspiracy existed; (2) the defendant knew of it; and (3) the defendant knowingly and voluntarily jointed it.’” Section 1347 prohibits “‘knowingly and willfully execut[ing] or attempt[ing] to execute, a scheme or artifice-(1) to defraud any health care benefit program; or (2) to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any health care benefit program, in connection with the delivery of or payment for health care benefits, items, or services.’” The court noted that a scheme to defraud “‘must involve some sort of fraudulent misrepresentations or omissions reasonably calculated to deceive persons or ordinary prudence and comprehension.’” (citations omitted).
Ultimately, the district court ruled that the government’s superseding indictment failed to allege (1) any misrepresentation or false or fraudulent statements or omission by Mattia; (2) how the “false and fraudulent insurance claims” were “caused” to be submitted to the Health Plan and who submitted those claims; or (3) what, if any, false or fraudulent statements or misrepresentations appeared on the insurance claims that were purportedly submitted to the company’s health plan. The court did not reach the challenges to the vagueness of medical necessity but did include a lengthy footnote challenging the strength of such claims and also stated in the opinion “there is unquestionably no singular or static definition for “medically unnecessary,” rendering it a vague term, which can have different meanings depending on context.” Defendants have long sought unsuccessfully to attack as vague the government’s use of the term “medical necessity.” Perhaps through continuing challenges, in New Jersey and elsewhere, they will ultimately prevail.
After losing a motion for reconsideration before the district court, the government appealed to the Third Circuit and argued that the district court applied a heightened pleading standard that is not required by the Federal Rules of Criminal Procedure. In its brief, the government described the standard applied by the district court as one “akin to requiring trial proofs or the kind of specificity that civil fraud complaints require.” It argued that under Federal Rule of Criminal Procedure 7(c)(1), an indictment is sufficient if it includes the statutory language, the elements of the statute, and the time period of the offenses. Because one of the government’s claims was for conspiracy and one was for aiding and abetting, it also argued that the district court’s finding that the superseding indictment was deficient because it failed to allege that Mattia personally made any false statements was improper. On the constitutional issue, the government argued that “medically unnecessary” is not unconstitutionally vague, and a person of ordinary intelligence would “understand that giving the false impression that a doctor legitimately prescribed a medication to obtain payment for medically unnecessary drugs was garden variety fraudulent conduct” under the health care fraud statute.
This case is pending in the Third Circuit but will have considerable impact on health care fraud pleading standards for future cases.
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2024 was a busy year in and out of the courts for legal developments regarding health care fraud laws. These trends and rulings have broad impact both on conduct and on the crafting and company oversight of compliance programs and training. We will continue to monitor this area in 2025 and share our findings.
[1] As an Assistant United States Attorney in Boston, before he entered private practice, David G. Lazarus represented the government on aspects of both the Teva and Regeneron False Claims Act cases relating to patient assistance programs. The information contained in this publication is based solely on publicly available information and reporting and is not based on that involvement.
[2] The United States Courts’ annual report provides fiscal year data. See https://www.uscourts.gov/data-news/reports/statistical-reports/judicial-business-united-states-courts. The Courts’ fiscal year ends September 30th.
[3] All percentages in this section are rounded to the nearest whole number.
[4] See note 1.
