Significant Implications for FCA Defendants: Second Circuit Clarifies “Willfulness” in McKesson Decision

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 the 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 defence.

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