Kickbacks

Kickbacks are improper payments to obtain referrals of business or favorable treatment, and they have been prosecuted as a form of health care fraud since the 1970s. Originally, kickback prosecutions have rested entirely on the Medicare/Medicaid Anti-Kickback Statute (“AKS”), 42 U.S.C. § 1320a-7b(b), which Congress enacted as an effort to protect those federal programs from goods and services being provided that are medically unnecessary, of poor quality, or harmful to patients. As more complex healthcare business arrangements have emerged, however, prosecutors have responded by applying various fraud statutes and legal theories to combat this type of fraud.

For the last twenty years, the DOJ has prosecuted individuals who have paid kickbacks to and from healthcare providers under the False Claims Act. A claim induced by a kickback is by definition a fraudulent claim. The government enjoys a number of advantages by prosecuting under the FCA rather than under the AKS or an administrative theory. The FCA has broad joinder and venue provisions, which allows prosecutors to bring in multiple party defendants from different jurisdictions. In addition, the civil burden of proof is a preponderance of the evidence, which is helpful in cases relying on inferences drawn from circumstantial evidence. Furthermore, in civil cases, the scope of discovery after the complaint is filed is far more detailed than in either criminal or administrative proceedings.

Pharmaceutical companies and medical device manufacturers are understandably interested in increasing the market share for their products. In addition to using legitimate means to advertise their products, some of these companies target physicians in kickback schemes because they can recommend and prescribe their drugs and other products directly to patients. For example, a manufacturer of a particular chemotherapy drug might offer kickbacks to a physician to prescribe that drug over a competitor’s drug.

There are certain legitimate financial arrangements that manufacturers can pursue with purchasers that are codified in statutory “safe harbors.” For example, a manufacturer might lease equipment, rent space, and otherwise contract with purchasers. Importantly, all of these terms and conditions must be clearly documented and the prices set must be the fair market value for those goods or services. If a manufacturer fails to outline the details of these arrangements, they may face liability under the AKS and/or the FCA.

Pharmaceutical companies commonly employ a host of illegal practices to encourage doctors to prescribe their drugs. Kickbacks may take the following forms and are all illegal under the False Claims Act:

  • Offering doctors “research” or “educational” grants to prescribe their drug
  • Encouraging doctors to seek Medicaid reimbursement for free drug samples
  • Paying doctors for prescribing or switching to their drugs through sham consulting programs and promotional speaking engagements
  • Rewarding high-volume prescribers
  • Providing tickets to sporting events, other forms of entertainment, lavish dinners, vacation trips, and golf outings to encourage or reward prescriptions

Example

Based on a whistleblower’s information, the United States sued Omnicare Inc., a nursing home specialty pharmacy company, for illegal kickbacks received from drug manufacturing companies and paid to nursing homes. The U.S. government alleged that Omnicare received kickbacks from Johnson & Johnson and agreed to recommend their drugs to nursing home patients. Omnicare disguised the kickbacks as data purchase fees, educational grants, and fees to attend Omnicare meetings. Additionally, Omnicare paid kickbacks to nursing homes which agreed to refer their patients to Omnicare. Omnicare provided pharmacist consulting services to the nursing homes for well under fair market value in exchange for the nursing homes’ promise to refer patients. The case was settled for $98 million, with $68.5 million going to the federal government and $43.5 million going to state Medicaid programs.

Contact Us

  1. 1 Free Consultation
  2. 2 Over 20 Years Experience
  3. 3 Serving Nationwide

Fill out the contact form or call us at 855.809.9119 to schedule your free consultation.

Leave Us a Message