On Oct. 7, the U.S. Supreme Court denied a petition for review and let stand a widely watched Second Circuit Court of Appeals decision in which the court ruled that the term “willfully” as used in the Anti-Kickback Statute (AKS) requires that defendants act with the understanding that their conduct is unlawful (if not necessarily unlawful under the AKS). As is customary, the Court gave no reason for the denial.
The case is of obvious importance because whether a defendant has violated the AKS and is therefore subject to criminal or civil penalties or liability under the False Claims Act often turns on the defendant’s mental state, i.e., whether the defendant acted “knowingly and willfully” for AKS purposes.
The case United States, ex rel. Hart v. McKesson Corp., 96 F. 4th 145 (2d Cir. 2024) was brought by a whistleblower who alleged that McKesson’s provision of certain business management tools to oncology practices that joined programs requiring them to purchase a substantial proportion of their drugs from McKesson violated the AKS.
The AKS prohibits “knowingly and willfully” offering or paying any remuneration to a person to induce such person to purchase any good, facility, service or item for which payment may be made under a federal health care program.
The principal issue in the McKesson case was whether the term “willfully” requires that a defendant, in this case McKesson, knew that its conduct is unlawful.
The whistleblower proposed a definition that would make it easier to prove an AKS violation. As argued by the whistleblower, the willfulness requirement could be satisfied in one of two ways, either:
- Through evidence that the defendant intentionally provided something of value in connection with a medical purchase reimbursed by the government while knowing that it is illegal to provide things of value in connection with such purchases
- Through evidence that the defendant intentionally performed an act that in fact violated the AKS
In other words, by this definition a defendant can violate the law even if the defendant has no idea that its conduct is unlawful in any way.
In rejecting the definition proposed by the whistleblower and instead holding that to violate the AKS a defendant must act knowing that its conduct is, in some way, unlawful, the Second Circuit wrote:
“We hold that the term ‘willfully’ in the AKS means what it typically means in federal criminal law. To act willfully under the AKS, a defendant must act with a ‘bad purpose.’ . . . In other words, the defendant must act ‘with knowledge that his conduct was unlawful.’ … None of this is to say, however, that a defendant must know of the AKS specifically or intend to violate that statute.”
The Court went on to state that interpreting “willfully” to require that a defendant act understanding that its conduct is unlawful (if not necessarily under the AKS) accords with the general goal of criminal law to punish only those who act with a “vicious will.” A more expansive interpretation would risk creating a trap for the unwary and deter socially beneficial conduct.
In denying review and letting the Second Circuit’s decision stand, the Court left unresolved, at least for now, what may be a split among the circuits as to the proper definition of “willfully.” In petitioning the Court to hear the case, the whistleblower asserted that the Second and Eleventh Circuits require that a defendant know that its conduct violates the law, while the Fifth and Eighth Circuits do not.
On the other hand, in its opinion, the Second Circuit, referencing cases in the Third, Fifth, Sixth, Seventh, Eighth and Eleventh Circuit, noted that its interpretation “aligns with the approach to the AKS taken by several of our sister circuits, which have held or implied that to be liable under the AKS, defendants must know that their particular conduct was wrongful.”
