New York v. Amgen Inc.

United States Court of Appeals
For the First Circuit

Nos. 10-1629; 10-1630; 10-1633; 10-1634; 10-1635; 10-1636; 10-1954;
10-1955

STATE OF NEW YORK; COMMONWEALTH OF MASSACHUSETTS; STATE OF
CALIFORNIA; STATE OF ILLINOIS; STATE OF INDIANA; STATE OF NEW
MEXICO EX REL. KASSIE WESTMORELAND; STATE OF GEORGIA EX REL.
KASSIE WESTMORELAND,

Plaintiffs, Appellants,

UNITED STATES EX REL. KASSIE WESTMORELAND; STATE OF DELAWARE;
STATE OF FLORIDA; STATE OF HAWAII; STATE OF LOUISIANA; STATE OF
MICHIGAN; STATE OF NEVADA; STATE OF NEW HAMPSHIRE; STATE OF
TENNESSEE; STATE OF TEXAS; COMMONWEALTH OF VIRGINIA; DISTRICT OF
COLUMBIA,

Plaintiffs,

v.

AMGEN INC.; ASD HEALTHCARE; INTERNATIONAL NEPHROLOGY NETWORK,
renamed INTEGRATED NEPHROLOGY NETWORK, d/b/a Dialysis Purchasing
Alliance, Inc.,

Defendants, Appellees,

AMERISOURCEBERGEN SPECIALTY GROUP; AMERISOURCEBERGEN CORPORATION;
IMMUNEX CORPORATION; MEDSCAPE, LLC; WEBMD HEALTH CORP.; WYETH;
WYETH PHARMACEUTICALS,

Defendants.

APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]

Before

Lynch, Chief Judge,
Lipez and Howard, Circuit Judges.
 Steven C. Wu, Assistant Solicitor General, with whom Eric T.
Schneiderman, Attorney General, Barbara D. Underwood, Solicitor
General, Richard Dearing, Deputy Solicitor General, Carolyn T.
Ellis, Special Assistant Attorney General, Medicaid Fraud Control
Unit, Margot Schoenborn, Special Assistant Attorney General,
Medicaid Fraud Control Unit, of New York; Eliseo Z. Sisneros,
Deputy Attorney General, Kamala D. Harris, Attorney General,
Nicholas P. Paul, Deputy Attorney General, of California; Joseph B.
Chervin, Assistant Attorney General, Lisa Madigan, Attorney
General, of Illinois; Jessica L. Harlan, Deputy Attorney General,
Medicaid Fraud Control Unit, Greg Zoeller, Attorney General, of
Indiana; Ann B. Ackil, Assistant Attorney General, Medicaid Fraud
Division, and Martha Coakley, Attorney General, of Massachusetts;
were on brief, for State of New York, Commonwealth of
Massachusetts, State of California, State of Illinois, and State of
Indiana, appellants.
Derek T. Ho, with whom Silvija A. Strikis, Joseph S. Hall,
Andrew S. Oldham, Kellogg, Huber, Hansen, Todd, Evans & Figel,
PLLC, Suzanne E. Durrell, Robert M. Thomas, Jr., and Royston H.
Delaney were on brief, for Kassie Westmoreland, appellant.
Charles W. Scarborough, Appellate Staff, Civil Division,
Department of Justice, with whom Tony West, Assistant Attorney
General, Carmen Ortiz, United States Attorney, and Douglas N.
Letter, Appellate Staff, Civil Division, Department of Justice,
were on brief, for the United States, amicus curiae.
Michele Odorizzi, with whom Kenneth S. Geller, Andrew Tauber,
Mayer Brown LLP, Brien T. O'Connor, Kirsten V. Mayer, William Dunn,
Ropes & Gray LLP, Daniel A. Curto, Michael D. Kendall, and
McDermott Will & Emery LLP were on brief, for Amgen Inc., appellee.
James M. Becker, with whom Buchanan Ingersoll Rooney PC, Eric
W. Sitarchuk, Morgan Lewis & Bockius, LLP, Peter Ball, Ryan M.
Cunningham, and Sally & Fitch were on brief, for International
Nephrology Network and ASD Healthcare, appellees.

July 22, 2011
 LYNCH, Chief Judge. Relator Kassie Westmoreland and the

plaintiff state intervenors in this qui tam action appeal from a

Rule 12(b)(6) dismissal of their pendent state False Claims Act

(FCA) causes of action against Amgen, Inc. (Amgen), International

Nephrology Network (INN), and ASD Healthcare (ASD). The district

court exercised jurisdiction over the action, which also alleged

violations of the federal FCA, 31 U.S.C. § 3729 et seq., pursuant

to 31 U.S.C. § 3732(b), 28 U.S.C. § 1331, and 28 U.S.C. § 1367. We

have jurisdiction over this appeal concerning only questions of

state law pursuant to 28 U.S.C. § 1291.

This appeal raises a set of questions similar to those

that arose recently for this circuit in United States ex rel.

Hutcheson v. Blackstone Medical, Inc., No. 10-1505, 2011 WL 2150191

(1st Cir. June 1, 2011). Like the plaintiffs in Hutcheson, the

plaintiffs in this appeal allege that the defendants caused the

submission of false or fraudulent claims for government payment.

Also like the plaintiffs in Hutcheson, they allege that the claims

were false or fraudulent because the claims misrepresented that

healthcare professionals had not received certain kickbacks. The

plaintiffs in Hutcheson alleged that the defendants in that suit

caused the submission of false or fraudulent claims to the federal

Medicare agency in violation of the federal FCA. By contrast, the

plaintiffs here on appeal allege that the defendants caused the

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submission of false or fraudulent claims to state Medicaid agencies

in violation of state FCAs.

Westmoreland and the state intervenors allege that Amgen,

acting in concert with INN and ASD, employed an elaborate kickback

scheme to induce medical providers to prescribe Aranesp, a drug

Amgen manufactures to treat anemia. This kickback scheme,

plaintiffs allege, contained two prongs. First, they allege that

Amgen included extra Aranesp in its single-dose vials of the drug

and encouraged providers to bill this free product to Medicaid.

Second, they allege that Amgen, INN, and ASD channeled improper

benefits to providers through sham consulting agreements,

honoraria, retreats, and the like to encourage them to purchase

Aranesp. Westmoreland and the state intervenors argue that these

kickbacks rendered the reimbursement claims at issue in this

litigation ineligible for payment, and that for this reason they

have stated a claim under the seven relevant state FCAs.

The district court held that the plaintiffs could not

survive a 12(b)(6) motion to dismiss because they had failed to

identify a false or fraudulent claim for Medicaid payment within

the meaning of those state FCAs. United States ex rel.

Westmoreland v. Amgen, Inc., 707 F. Supp. 2d 123 (D. Mass. 2010).

In so holding, the district court employed the same legal framework

to analyze state FCA claims as it did to analyze federal FCA claims

in United States ex rel. Hutcheson v. Blackstone Medical, Inc., 694

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F. Supp. 2d 48 (D. Mass. 2010). We reject that framework, invoked

on appeal by the defendants, to the extent that it is inconsistent

with our decision in Hutcheson, 2011 WL 2150191, concerning what

constitutes a false or fraudulent claim for government payment.

The state FCA provisions at issue here are not relevantly different

from the federal FCA provisions at issue in Hutcheson.

On the merits, we affirm in part and reverse in part. We

reverse the district court's dismissal of the plaintiffs' claims

under six of the seven state FCAs at issue and affirm on different

grounds the district court's dismissal of the plaintiffs' claims

under the remaining state FCA. The plaintiffs have more than

adequately alleged that providers submitted claims that

misrepresented compliance with a precondition of Medicaid payment

in New York, Massachusetts, California, Illinois, Indiana, and New

Mexico. With respect to the claims under Georgia's FCA, we affirm

on different grounds the district court's holding that the

plaintiffs have not identified a false or fraudulent claim for

payment. The plaintiffs have not adequately alleged that the

providers submitted claims to Georgia's Medicaid program that did

not comply with a precondition of payment.

I.

Westmoreland initially brought this qui tam action

against Amgen, INN, ASD, and two other corporate defendants under

the federal FCA and various state FCAs on behalf of the United

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States, seventeen individual states, and the District of Columbia.

Westmoreland worked as an Amgen employee from September 2002 to

mid-March 2005 and filed her first complaint on June 5, 2006.1 The

United States notified the district court on September 1, 2009 that

it was not intervening in the action at that time. Fifteen states

and the District of Columbia filed a multi-state complaint in

intervention on October 30, 2009.

Westmoreland appeals the district court's dismissal of

the state law claims she asserted on behalf of the two non-

intervening states, Georgia and New Mexico, but she does not appeal

the federal claims she asserted on behalf of the United States.2

California, Illinois, Indiana, Massachusetts, and New York have

also appealed the district court's dismissal of their claims.3 On

1
In her first complaint, Westmoreland brought claims on
behalf of only sixteen individual states. She later included
claims on behalf of the state of Georgia in her first amended
complaint, filed on July 2, 2007. The defendants have not
challenged that amendment.
2
The district court dismissed some of Westmoreland's
federal claims under the first-to-file bar of the federal FCA and
dismissed the remainder of her federal claims under Rule 12(b)(6).
United States ex rel. Westmoreland v. Amgen, Inc., 707 F. Supp. 2d
123, 140 (D. Mass. 2010). The district court noted, however, that
there appeared to be "a few allegations, albeit not fully developed
and likely insufficient at this time, that may support alternative
theories of liability" under the state and federal FCAs. Id. at
139. Westmoreland amended her complaint with respect to her claims
under the federal FCA and has since survived a motion to dismiss
those claims. See United States ex rel. Westmoreland v. Amgen,
Inc., 738 F. Supp. 2d 267 (D. Mass. 2010).
3
Among the fifteen state intervenors, six voluntarily
dismissed their claims during the course of the district court's

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appeal, the United States has been allowed to participate as an

amicus in support of Westmoreland and the state intervenors.

Amgen, INN, and ASD are the only remaining defendants on appeal.4

The factual allegations relevant to the claims on appeal

are as follows. In 2001, the Food and Drug Administration (FDA)

approved Amgen's drug Aranesp for treatment of anemia associated

with chronic renal failure. A year later, the FDA approved Aranesp

for the treatment of certain chemotherapy-induced anemia as well.

Aranesp competes in these markets with Procrit, a drug also

manufactured by Amgen but sold and marketed by a different company,

Johnson & Johnson. Westmoreland and the state intervenors allege

that Amgen, with the help of its co-defendants, employed a two-

pronged kickback scheme to encourage providers to prescribe Aranesp

rather than Procrit. Between 2001 and 2007, Amgen's revenue from

Aranesp rose from $27 million in 2001 to $2.154 billion in 2007,

and amounted to $11 billion in the aggregate between 2001 and 2008.

Some kickbacks, plaintiffs allege, took the form of

excess product included in Aranesp vials. Aranesp is an injectable

drug sold in single-dose vials such that each vial is used for one

patient in one administration of the drug. The United States

proceedings. The District of Columbia and four states did not
appeal the district court's decision.
4
The two other corporate defendants initially named in
this suit, AmerisourceBergen Specialty Group and AmerisourceBergen
Corporation, were dismissed from this action by the district court.
That ruling has not been appealed.

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Pharmacopeia (USP) requires that a vial of injectable drug contain

an amount of the drug in slight excess of the labeled volume to

permit withdrawal and administration of the labeled amount. USP

recommends that this "overfill" amount be up to 10% of the dosage.

It is undisputed that Aranesp vials contained 19% overfill when the

drug entered the marketplace in 2001, and 16.8% overfill between

2002 and 2008. It is also undisputed that medical providers

generally may receive reimbursement from state Medicaid programs

for administered overfill.

Westmoreland and the state intervenors allege that Amgen

actively encouraged providers to bill excess overfill. Amgen's

sales force, the plaintiffs allege, distributed economic analyses

to medical providers that included assessments of how billing

Aranesp overfill would impact and increase the providers' potential

profits. The plaintiffs also allege that Amgen sales

representatives promoted Aranesp by emphasizing the profit benefits

of seeking reimbursement for overfill. Consonant with these

alleged efforts, Amgen adjusted overfill amounts in Procrit such

that the overfill amounts in Aranesp vials were 50% greater than

the amounts in Procrit vials. The plaintiffs allege that Amgen

knowingly created this disparity to give Aranesp a competitive

advantage over Procrit.

Other kickbacks, plaintiffs allege, took the form of free

weekend retreats, lavish advisory board meetings, sham honoraria,

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consulting fees, and other benefits offered to induce medical

providers to prescribe Aranesp rather than Procrit. The plaintiffs

allege Amgen conveyed these benefits with the assistance of INN and

ASD. INN is an entity that purported to operate as a group

purchasing organization that purchased drugs in volume for the

benefit of its members. ASD is a wholesale drug distributor and

sister company of INN from which INN purchased Aranesp.

INN, the plaintiffs allege, received funds from Amgen

disguised as administrative fees and used these funds to confer

benefits to providers at Amgen's direction. ASD, they allege,

participated in events INN put on to advance Aranesp, and provided

Aranesp at lower prices to providers in return for payments

funneled through INN. The plaintiffs allege that ASD price-fixing

and discounting also increased profits for providers, as the

Medicaid reimbursement amount would not be similarly reduced.

Westmoreland and the state intervenors argue that by

paying these kickbacks, the defendants knowingly caused the

providers to submit false or fraudulent claims for Medicaid payment

in violation of the state FCAs in California, Georgia, Illinois,

Indiana, Massachusetts, New Mexico, and New York. See California

False Claims Act, Cal. Gov't Code §§ 12650 - 12656; Georgia State

False Medicaid Claims Act, Ga. Code Ann. §§ 49-4-168 - 49-4-168.6;

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Illinois Whistleblower Reward and Protection Act,5 740 Ill. Comp.

Stat. §§ 175/1 - 175/8; Indiana False Claims and Whistleblower

Protection Act, Ind. Code §§ 5-11-5.5-1 - 5-11-5.5-18;

Massachusetts False Claims Act, Mass. Gen. Laws ch. 12, §§ 5A - 5O;

New Mexico Medicaid False Claims Act, N.M. Stat. Ann. §§ 27-14-1 -

27-14-15; New York False Claims Act, N.Y. State Fin. Law §§ 187 -

194.

Like the federal FCA, these state statutes impose

liability on any person who (1) knowingly presents, or causes to be

presented, a false or fraudulent claim for payment or approval to

a state, (2) knowingly makes, or causes to be made or used, a false

record or statement to get a false or fraudulent claim paid or

approved by the state, or (3) conspires to defraud the state by

getting a false claim allowed or paid. See Cal. Gov't Code

§§ 12651(a)(1)-(3); Ga. Code Ann. §§ 49-4-168.1(a)(1)-(3); 740 Ill.

Comp. Stat. §§ 175/3(a)(1)(A)-(C); Ind. Code § 5-11-5.5-2(b); Mass.

Gen. Laws ch. 12, §§ 5B(1)-(3); N.M. Stat. Ann. §§ 127-14-4(A)-(D);

N.Y. State Fin. Law §§ 189(1)(a)-(c). Six of the seven statutes

provide that a defendant acts "knowingly" if he has "actual

knowledge" of a claim or statement's truth or falsity, or "acts in

deliberate ignorance" or "reckless disregard" to its truth or

5
In July 2010, during this litigation, an amendment re-
titled this statute the Illinois False Claims Act. See 2010 Ill.
Legis. Serv. 96-1304. The amendment made other changes to the act
as well, but none of those changes are relevant here.

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falsity. Cal. Gov't Code § 12650(b)(2); Ga. Code Ann. § 49-4-

168(2); 740 Ill. Comp. Stat. § 175/3(b)(1); Ind. Code § 5-11-5.5-

1(4); Mass. Gen. Laws ch. 12, § 5A(a); N.Y. State Fin. Law

§ 188(3). The New Mexico FCA does not itself define this term.

See N.M. Stat. Ann. § 27-14-3.

Westmoreland and the state intervenors assert that a

claim is false or fraudulent under these statutes if it

misrepresents compliance with a precondition of payment. A medical

provider that submits a claim for Medicaid reimbursement, they

argue, impliedly represents that the claim is payable. The

plaintiffs assert that the kickbacks provided by Amgen, INN, and

ASD rendered Medicaid reimbursement claims submitted by medical

providers for Aranesp ineligible for payment under the terms of

state laws, regulations, and other documentation accompanying

claims for payment submitted to state Medicaid programs. Because

Amgen, INN, and ASD knowingly caused the submission of these

claims, the plaintiffs allege, they violated the state FCAs.

The district court held that Westmoreland and the state

intervenors had failed to state a claim under any of the state

FCAs. Drawing on its analysis in Hutcheson, 694 F. Supp. 2d 48,

the district court held that a claim can only be false or

fraudulent if it is "factually false" or "legally false." A claim

is factually false, it held, if it misstates facts. A claim can be

legally false, it held, under either an "express certification

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theory" or an "implied certification theory." Under the express

certification theory, a claim is false or fraudulent if the

submitting party expressly certifies compliance with a statute or

regulation that is a precondition of payment but the party is not

actually in compliance with that statute or regulation. Under the

implied certification theory, a claim is false or fraudulent if the

submitting party, without making any express certifications, has

failed to comply with a precondition of payment expressly stated in

a statute or regulation. Amgen, 707 F. Supp. 2d at 133.

Applying this framework, the district court held that

Westmoreland and the state intervenors had failed to identify a

false or fraudulent claim cognizable under the state FCAs. The

plaintiffs, it held, had not argued that the claims were factually

false, id. at 133, and had not shown that they were false or

fraudulent under either the express or implied certification

theories, id. at 139. As to the express theory, the district court

held that statements in Medicaid provider agreements conditioning

payment on compliance with applicable state and federal laws were

too broad to establish an express certification of compliance with

anti-kickback statutes. Id. at 136-37. As to the implied theory,

the district court held that the plaintiffs had failed to identify

a state law or regulation that expressly conditioned Medicaid

reimbursement on compliance with anti-kickback statutes. Id. at

138-39. We rejected portions of this framework for analyzing

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whether a claim is false or fraudulent in Hutcheson and we do so

again here.

II.

This court reviews de novo the grant of a motion to

dismiss under Rule 12(b)(6), "accepting as true all well-pleaded

facts, analyzing those facts in the light most hospitable to the

plaintiff's theory, and drawing all reasonable inferences for the

plaintiff." Hutcheson, 2011 WL 2150191, at *5. To survive a

motion to dismiss, a complaint must set forth "factual allegations,

either direct or inferential, respecting each material element

necessary to sustain recovery under some actionable legal theory."

Id. (quoting Gagliardi v. Sullivan, 513 F.3d 301, 305 (1st Cir.

2008)) (internal quotation marks omitted).

Given the substantive similarity of the state FCAs

invoked here and the federal FCA with respect to the provisions at

issue in this litigation, the state statutes may be construed

consistently with the federal act.6 See Massachusetts v. Mylan

Labs., 608 F. Supp. 2d 127, 140 (D. Mass. 2008) (citing Scannell v.

Att'y Gen., 872 N.E.2d 1136, 1138 n.4 (Mass. 2007)); Kuhn v.

LaPorte Cnty. Comprehensive Mental Health Council, No. 3:06-CV-317

CAN, 2008 WL 4099883, at *3 n.1 (N.D. Ind. Sept. 4, 2008); Am.

6
To be clear, this federal case law dictates only a mode
of analysis. It does not dictate that claims that are false or
fraudulent under the federal FCA would necessarily be false or
fraudulent under the state FCAs had they been submitted to a state
government rather than the federal government, or vice versa.

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Contract Servs. v. Allied Mold & Die, Inc., 114 Cal. Rptr. 2d 773,

777 (Cal. Ct. App. 2001); Scachitti v. UBS Fin. Servs., 831 N.E.2d

544, 557-58 (Ill. 2005). Accordingly, we address whether the

plaintiffs have identified false or fraudulent claims under the

seven state laws with reference to our case law interpreting the

meaning of that phrase under the federal FCA.

On that question, our decision in Hutcheson, 2011 WL

2150191, controls. In Hutcheson, we declined to adopt the legal

framework employed by the district court as to when a claim is

false or fraudulent under the federal FCA. The plaintiff in that

case alleged that, by paying kickbacks to physicians, the defendant

had knowingly caused hospitals and physicians to submit false or

fraudulent claims for payment to Medicare. Id. at *2-3. We

reversed the district court's holding that the plaintiff had failed

to identify a false or fraudulent claim sufficient to survive Rule

12(b)(6). Id. at *16. Medicare forms signed by the hospitals and

physicians, we held, made clear that when those entities submitted

claims for Medicare payment, they represented that transactions

underlying the claims did not involve kickbacks prohibited by the

federal Anti-Kickback Statute (AKS), 42 U.S.C. § 1320a-7b. Id. at

*13-14. We held that the plaintiffs had adequately alleged both

that illegal kickbacks had underlain claims for payment and that

the resulting misrepresentation was material. Id. at *13-15.

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 Our analysis in Hutcheson did not employ the district

court's conceptual divisions between (1) legal and factual falsity

and (2) express and implied certification. Id. at *6-7. We

rejected the district court's holding that "a claim can only be

impliedly false or fraudulent for non-compliance with a legal

condition of payment if that condition is expressly stated in a

statute or regulation." Id. at *8. "Other means exist to cabin

the breadth of the phrase 'false or fraudulent,'" we held,

including the FCA's materiality and scienter requirements. Id. at

*10. We also rejected a categorical argument advanced by the

defendant, and seemingly endorsed by the district court, that

representations made by a submitting entity with respect to its own

legal compliance "cannot encompass a precondition of payment

applicable to non-submitting entities." Id. at *10. Such a rule,

we held, would impermissibly narrow the scope of liability for

entities that cause other entities to submit claims that do not

comply with a precondition of payment. Id. at *11-12.

To survive this 12(b)(6) motion, Westmoreland and the

state intervenors must make two showings with adequate specificity.

First, they must show that the claims at issue in this litigation

misrepresented compliance with a material precondition of Medicaid

payment such that they were false or fraudulent. Second, they must

show that the defendants knowingly caused the submission of the

false or fraudulent claims, the submission of false records or

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statements to get the false or fraudulent claims paid, or otherwise

conspired to defraud the state by getting the false or fraudulent

claims paid. On appeal, Amgen, INN, and ASD do not contest that

Westmoreland and the state intervenors have met their burden as to

the latter requirement; they only contest the former requirement.7

The only question presented, then, is whether the claims at issue

misrepresented compliance with a material precondition of payment

forbidding the alleged kickbacks.

7
The defendants seek, unsuccessfully, to raise two
additional issues, one of which invokes the scienter requirement.
First, the defendants argue that the district court's judgment
should be affirmed because excess overfill cannot be deemed a
kickback. They assert that the FDA requires some amount of
overfill and that the plaintiffs have not identified any binding
ceiling on the proper amount of overfill. Relatedly, Amgen asserts
that in the absence of any such binding requirements, it could not
have acted with the requisite scienter under the FCA. Even if
these arguments are correct, and we do not decide the questions,
they would not be grounds for dismissal. Westmoreland and the
state defendants do not only assert that the claims at issue in
this litigation were false or fraudulent on account of the alleged
overfill; they also assert that the claims were false or fraudulent
on account of free weekend retreats, sham honoraria, and so on.
Second, the defendants argue that we should affirm the
district court's dismissal on the ground that the plaintiffs failed
to plead their claims with adequate particularity under Rule 9(b).
As we held in United States ex rel. Hutcheson v. Blackstone
Medical, Inc., No. 10-1505, 2011 WL 2150191 (1st Cir. June 1,
2011), however, "Rule 9(b) is not a proper alternative ground for
affirmance." Id. at *6 n.8. Like the district court in Hutcheson,
the district court here "never considered this argument. It is up
to the court in the first instance to weigh the adequacy of the
complaint for purposes of Rule 9(b) and, if appropriate, to provide
'an opportunity to correct [any] pleading deficiencies.'" Id.
(quoting United States ex rel. Poteet v. Bahler Med., Inc., 619
F.3d 104, 115 (1st Cir. 2010)).

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 As our decision in Hutcheson makes clear, this is a fact-

intensive and context-specific inquiry. Westmoreland and the state

intervenors make two related arguments as to why the Medicaid

claims here were false or fraudulent under the relevant state FCAs.

First, they assert that "[i]t is widely recognized on both the

federal and State levels that kickback schemes are fraudulent

practices under Medicaid and Medicare," and that because of this

the alleged kickbacks rendered the claims at issue false or

fraudulent under the state FCAs.8 Second, they assert that state

laws, regulations, and Medicaid provider agreements make clear that

the alleged kickbacks violated a precondition of Medicaid payment

established in each of the seven states involved in this

litigation.

8
Amgen, INN, and ASD argue that the plaintiffs waived this
argument by failing to present it to the district court. They
invoke the district court's observation that the "[p]laintiffs do
not dispute that all of their claims rely on the false
certification theory of liability," Westmoreland, 707 F. Supp. 2d
at 133, and argue that under this theory of liability a claim may
not be false or fraudulent absent an express or implied
certification.
This argument, contrary to our decision in Hutcheson, treats
the concept of certification as if it had some "paramount and
talismanic significance." Hutcheson, 2011 WL 2150191, at *7
(quoting United States ex rel. Hendow v. Univ. of Phoenix, 461 F.3d
1166, 1172 (9th Cir. 2006)) (internal quotation marks omitted). We
have rejected the district court's narrow understanding of the
notion of "implied certification," which it introduced in United
States ex rel. Hutcheson v. Blackstone Medical, Inc., 694 F. Supp.
2d 48 (D. Mass. 2010), the day after argument on the motions to
dismiss in this case. At any rate, the thrust of the argument
advanced by Westmoreland and the state intervenors is the same as
it was in the trial court.

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 We need not engage the first of these two arguments,

which stretches too broadly. Even if it is generally accepted that

kickbacks are a species of fraud, that cannot resolve this dispute.

The question here is whether claims submitted to the seven state

Medicaid programs misrepresented compliance with a precondition of

payment recognized by those particular programs. So long as states

have discretion over the operation of their Medicaid programs,

generalities about national views as to what constitutes a

precondition of Medicaid payment cannot control.9 Cf. Pharma.

Research & Mfrs. of Am. v. Walsh, 538 U.S. 644, 665 (2003) (noting

that the states have "substantial discretion" in setting certain

requirements of their Medicaid programs (quoting Alexander v.

Choate, 469 U.S. 287, 303 (1985))).

Accordingly, we look to the preconditions of payment

recognized under the seven state Medicaid programs involved in this

litigation. The plaintiffs contend that statutes and regulations

in each of the seven states make clear that claims affected by

kickbacks like those alleged here are not eligible for Medicaid

payment. The plaintiffs have indeed shown as much with respect to

9
Under the Medicaid Act, 42 U.S.C. §§ 1396-1396v, "the
federal government provides financial support to states that
establish and administer state Medicaid programs in accordance with
federal law through a state plan approved by the U.S. Department of
Health and Human Services." Long Term Care Pharmacy Alliance v.
Ferguson, 362 F.3d 50, 51 (1st Cir. 2004). Westmoreland and the
state intervenors do not assert that the federal government
conditions funding to state Medicaid programs on the requirement
that these programs refuse to pay claims affected by kickbacks.

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the regulatory regimes in Illinois, Indiana, Massachusetts, and New

York. They have also shown that provider agreements in California

and New Mexico make clear that claims submitted to the Medicaid

programs in each of those states may not be paid if they are

influenced by kickbacks like those alleged in this litigation.

Relator Westmoreland has not made such a showing under statutes,

regulations, or provider agreements with respect to claims

submitted to the Georgia Medicaid program.

We begin with the four states whose statutes and

regulations make clear that the kickbacks alleged in this case

preclude Medicaid payment.

Claims for Medicaid payment in Illinois "may be withheld

. . . upon receipt by the Department [of Healthcare and Family

Services] of evidence" of "fraud or willful misrepresentation under

the Illinois Medical Assistance Program." Ill. Admin. Code tit.

89, § 140.44(a). Under Ill. Admin. Code tit. 89, § 140.35, titled

"False Reporting and Other Fraudulent Activities," medical

providers are subject to the requirements of both the federal AKS,

which "prohibits kickbacks, false reporting and other fraudulent

activities," id. § 140.35(b) (emphasis added), and the Illinois

AKS, "pertaining to penalties for vendor fraud and kickbacks," id.

§ 140.35(a) (emphasis added). The Illinois AKS also extends

liability to any entity that "willfully, by means of a false

statement or representation, or by concealment of any material fact

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or by other fraudulent scheme or device . . . obtains or attempts

to obtain benefits or payments under this Code to which [it] is not

entitled, or in a greater amount than that to which [it] is

entitled." 305 Ill. Comp. Stat. 5/8A-3(a) (emphasis added).

Indiana law sets similar requirements. A portion of the

Indiana Medicaid statute, Indiana Code §§ 12-15-1 - 12-15-44, makes

clear that if the state's Medicaid office "determines that a

provider has violated a Medicaid statute or rule adopted under a

Medicaid statute, the office may" deny "payment to the provider for

Medicaid services provided during a specified time," id. § 12-15-

24-1. Another portion of the state's Medicaid statute provides

that a person who "furnishes items or services to an individual for

which payment is or may be made under this chapter and who

solicits, offers, or receives a kickback in connection with the

furnishing of the items or services or the making or receipt of the

payment" commits a misdemeanor. Id. § 12-15-22-2. The state's

regulations also make clear that the state's Medicaid office "may

deny payment" of claims "arising out of . . . acts or practices"

including (1) "Engaging in a course or conduct or performing an act

deemed by the office to be improper or abusive of the Medicaid

program," 405 Ind. Admin. Code § 1-1-4(a)(6)(E), and (2) "Violating

any provisions of state or federal Medicaid law or any rule or

regulation promulgated pursuant thereto," id. § 1-1-4(a)(6)(H).

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 The same applies to the regulatory regime governing the

Massachusetts Medicaid program. The program "may withhold payments

to a provider . . . if [it] believes that the provider has received

any overpayments or committed any violations." 130 Mass. Code

Regs. 450.249(B). Massachusetts law governing "Medical Assistance"

provides:

Whoever solicits or receives any remuneration,
including any bribe or rebate, directly or
indirectly, overtly or covertly, in cash or in
kind in return for purchasing, leasing,
ordering or arranging for or recommending
purchasing, leasing, or ordering any good,
facility, service, or item for which payment
may be made in whole or in part under this
chapter, or whoever offers or pays any
remuneration, including any bribe or rebate,
directly or indirectly, overtly or covertly,
in cash or in kind to induce such person to
purchase, lease, order, or arrange for or
recommend purchasing, leasing, or ordering any
good, facility, service, or item for which
payment may be made in whole or in part under
this chapter shall be punished . . . .

Mass. Gen. Laws ch. 118E, § 41. Violations are punishable by "a

fine of not more than ten thousand dollars," and/or "imprisonment

in the state prison for not more than five years or in a jail or

house of correction for not more than two and one-half years." Id.

As to the New York Medicaid program, the state's

regulatory regime provides that an "overpayment includes any amount

not authorized to be paid under the medical assistance program,

whether paid as the result of inaccurate or improper cost

reporting, improper claiming, unacceptable practices, fraud, abuse

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or mistake." N.Y. Comp. Codes R. & Regs. tit. 18, § 518.1(c). The

regime defines "unacceptable practice," to include "[b]ribes and

kickbacks," id. § 515.2(b)(5), and lists within this category both

"soliciting or receiving," id. § 515.2(b)(5)(ii) and "offering or

paying," id. § 515.2(b)(5)(iv), "either directly or indirectly any

payment (including any kickback, bribe, referral fee, rebate or

discount), whether in cash or in kind, in return for purchasing,

leasing, ordering or recommending any medical care, services or

supplies for which payment is claimed under the program," id.

§§ 515.2(b)(5)(ii), (iv). New York's anti-kickback statute forbids

kickbacks in similar terms. See N.Y. Soc. Serv. Law §§ 366-d, -f.

The defendants make two relevant arguments that claims do

not violate a precondition of payment if they are affected by

kickbacks like those alleged in this litigation. First, they argue

that the plaintiffs ignore the difference between conditions on

participation in Medicaid and conditions on payment. This

distinction, however, is not relevant to the provisions just

described, which explicitly refer to payment. Second, they argue

that, even if these provisions establish that kickbacks like those

alleged here violate a precondition of payment, they do not

expressly include kickbacks within definitions of "false claims,"

compare N.Y. Comp. Codes R. & Regs. tit. 18, § 515.2(b)(1) with id.

§ 515.2(b)(5), which they assert are more typically described as

claims whose falsity increases the dollar amount claimed, cf. N.Y.

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Comp. Codes R. & Regs. tit. 18, § 515.2(b)(1). The language

defendants cite, however, does not purport to limit the definition

of a false or fraudulent claim; it merely provides examples of

situations that would give rise to false or fraudulent claims.

Each of these four state regulatory regimes make clear

that claims are not entitled to Medicaid payment if they are

affected by kickbacks like those alleged here. Given that the

absence of such kickbacks is a precondition of being entitled to

payment under these Medicaid programs, the reimbursement claims

submitted to the four programs "represented that there had been

compliance with a material precondition of payment that had not

been met." Hutcheson, 2011 WL 2150191, at *13; see also United

States v. Sci. Applications Int'l Corp., 626 F.3d 1257, 1268-69

(D.C. Cir. 2010). Accordingly, the plaintiffs have stated claims

under these four state FCAs.

We now turn to the argument that the claims submitted to

California and New Mexico violated preconditions of Medicaid

payment in those states because of the alleged kickbacks. We

bypass the argument that statutes and regulations in the two states

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make this clear,10 as the plaintiffs have identified provider

agreements in the two states that are more than sufficient.

As to California's provider agreement, which providers

must sign to participate in the state's Medicaid program, the first

page requires that providers agree "to comply with all applicable

provisions of Chapters 7 and 8 of the Welfare and Institutions

Code." Chapter 7 of the code includes California's anti-kickback

statute, which applies to:

Any person who solicits or receives any
remuneration, including, but not restricted
to, any kickback, bribe, or rebate, directly
or indirectly, overtly or covertly, in cash or
in valuable consideration of any kind . . . in
return for the purchasing, leasing, ordering,
or arranging for or recommending the
purchasing, leasing, or ordering of any goods,
facility, service or merchandise for which
payment may be made, in whole or in part,
under this chapter or Chapter 8.

Cal. Welf. & Inst. Code § 14,107.2(a).

10
Under California law, the plaintiffs have noted that the
state Medicaid program may withhold payment when it receives
evidence "of fraud or willful misrepresentation by a provider as
defined in Section 14043.1." Cal. Welf. & Inst. Code
§ 14107(a)(2). Section 14043.1 defines "fraud" as "intentional
deception or misrepresentation made by a person with the knowledge
that the deception could result in some unauthorized benefit to
himself or herself or some other person. It includes any act that
constitutes fraud under applicable federal or state law." Id.
§ 14043.1(I). They have also identified a regulation that lists
fraud as grounds for suspension from California's Medicaid program.
See id. § 14123. Westmoreland has not identified any relevant
provisions of New Mexico law other than the state's FCA and anti-
kickback statute.

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 As to New Mexico's provider agreements,11 which again

providers must sign to participate in the state's Medicaid program,

Article VIII is entitled "Imposition of Sanctions for Fraud or

Misconduct." This Article states:

If the provider obtains an excess payment or
benefit willfully, by means of false
statement, representation, concealment of any
material fact, or other fraudulent scheme or
devise with intent to defraud, criminal
sentences and fines and/or civil monetary
penalties shall be imposed pursuant to, but
not limited to, the Medicaid Fraud Act, NMSA
1978, §§ 30-44-1 et seq., 42 U.S.C. § 1320a-
7b, and 42 C.F.R. § 455.23.

As this language makes clear, both the provider agreements and New

Mexico's anti-kickback statute denote kickbacks as a form of fraud.

New Mexico's Medicaid Provider Act, N.M. Stat. Ann. §§ 27-11-1 et

seq., moreover, provides that the state Medicaid program may

suspend or revoke a provider agreement if a provider has

"fraudulently procured or attempted to procure any benefit from

medicaid," id. §§ 27-11-3(B)(6), (C)(3). The state's provider

agreements make clear that violations of the state's Medicaid

Provider Act warrant their suspension or revocation.

It is true that these provider agreements speak to the

compliance of the providers rather than third parties like Amgen,

11
Westmoreland has introduced two provider agreements from
New Mexico, one applicable to individual providers within a group
(Form 312) and the other applicable to groups, organizations, or
individual providers to whom payment may be made (Form 335). These
two agreements are not relevantly different.

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INN, and ASD, but this is of no moment as to whether they rendered

the relevant claims false or fraudulent. The agreements amount to

a representation of compliance with the relevant anti-kickback

statutes, and the plaintiffs assert that the alleged kickbacks

rendered this representation incorrect. The defendants again

assert that this conclusion ignores a distinction between

conditions of Medicaid payment and conditions of Medicaid

participation. We again do not agree that this distinction is

relevant. The California agreement requires providers to represent

compliance with the state's anti-kickback statute, and the New

Mexico agreement requires providers to acknowledge that non-

compliance with anti-kickback laws vitiates a provider's ability to

get its claims paid.12

With respect to Georgia, however, the plaintiff relator

has not identified any materials that make clear that claims

affected by kickbacks may violate a precondition of payment under

the state's Medicaid program. Westmoreland argues that both

Georgia case law and Medicaid provider agreements make such a

precondition clear. Each of these arguments fail.

12
Amgen argues as well that the plaintiffs' failure to
prove that the providers acted with scienter "necessarily dooms"
the states' assertion that the government could disavow the
providers' Medicaid contracts. In Hutcheson, we held that FCA
liability does not depend on "whether the submitting entity knew or
should have known about a non-submitting entity's unlawful
conduct." Hutcheson, 2011 WL 2150191, at *11. At any rate, the
plaintiffs do allege that the providers acted with scienter in
accepting the alleged kickbacks.

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 As to Georgia case law, Westmoreland cites a judicial

construction of Ga. Code Ann. § 49-4-146.1(b)(1)(C). That

provision states that "It shall be unlawful,"

(1) For any person or provider to obtain,
attempt to obtain, or retain for himself,
herself, or any other person any medical
assistance or other benefits or payments under
this article, or under a managed care program
operated, funded, or reimbursed by the Georgia
Medicaid program, to which the person or
provider is not entitled, or in an amount
greater than that to which the person or
provider is entitled, when the assistance,
benefit, or payment is obtained, attempted to
be obtained, or retained, by: . . . (C) Any
fraudulent scheme or device[.]

Ga. Code Ann. § 49-4-146.1(b). Westmoreland argues that Georgia

case law recognizes that kickbacks are a "fraudulent scheme or

device" for purposes of this statute, citing one case: Culver v.

State, 562 S.E.2d 201, 206-07 (Ga. Ct. App. 2002), rev'd on other

grounds sub nom. State v. Kell, 577 S.E.2d 551 (Ga. 2003). That

case, however, does not refer to kickbacks, and instead concerned

a scheme to bill the state Medicaid program for unnecessary drug

tests, at inflated prices, through a sham arrangement.

As to Georgia's Medicaid provider agreement, Westmoreland

presents the following argument. The first page of the form

states, "Provider shall comply with all of the Department's

requirements applicable to the category(ies) of service in which

Provider participates under this Statement of Participation,

including Part I, Part II and the applicable Part III manuals."

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The Part I manual, she argues, includes an anti-kickback

prohibition as one of the State's "general conditions of

participation" in the Medicaid program. The purported anti-

kickback provision states that providers shall

[n]ot contact, provide gratuities or advertise
"free" services to Medicaid or PeachCare for
Kids members for the purpose of soliciting
members' requests for services . . . . Any
offer or payment of remuneration, whether
direct, indirect, overt, covert, in cash or in
kind, in return for the referral of a Medicaid
or PeachCare for Kids member is also
prohibited.

Although this provision may identify some preconditions of payment

under Georgia's Medicaid program, it is hardly relevant to the

alleged kickbacks in this case. The plaintiffs assert that the

kickbacks encouraged the use of Aranesp; they do not speak at all

about payments in exchange for referrals of patients.

It may be that under Georgia's Medicaid program it is a

precondition of payment that claims not be affected by kickbacks

like the kickbacks alleged in this case. Westmoreland has not

identified any authority, however, that makes this clear. It bears

emphasis that Georgia, unlike the other six states involved in this

litigation, does not have a state law analogue to the federal AKS.

In the absence of any authority on this point, Westmoreland cannot

establish that the claims for Medicaid payment submitted to

Georgia's Medicaid program were false or fraudulent. Accordingly,

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she cannot state a claim against Amgen, INN, or ASD under Georgia's

FCA.

III.

For the foregoing reasons, we reverse the district

court's dismissal of plaintiffs' claims under the state FCAs in

California, Illinois, Indiana, Massachusetts, New Mexico, and New

York. We affirm the district court's dismissal of the plaintiffs'

claims under Georgia's FCA. Costs shall be awarded to the

prevailing parties on each of the claims.

So ordered.

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