What if your general practitioner prescribed you a medication, not because she thought it was the best treatment, but because the drug manufacturer had paid her a bribe? What if your oncologist advised you to undergo an expensive battery of tests because he owned the laboratory that would conduct those tests and could bill the government for their cost? What if your surgeon advised you to have a medical device implanted because the device manufacturer had offered her a share of the profits?

Unfortunately, these sorts of situations arise all too often. While most healthcare professionals are dedicated to their patients and do their best to recommend treatments in their patients’ best interests, some providers let greed stand in the way of patient care. Fortunately, Congress has enacted two laws that are aimed at protecting beneficiaries of government healthcare programs—such as Medicare, Medicaid, and TRICARE—from these types of schemes.

The Anti-Kickback Statute

The Anti-Kickback Statute (AKS) is one of the most powerful tools in the fight against healthcare fraud. This statute, codified at 42. U.S.C. § 1320a-7b(b), prohibits anyone from paying, receiving, or soliciting anything of value in exchange for prescribing a drug, ordering a test, recommending or performing a treatment, or referring a patient, among many other types of behavior. The AKS doesn’t just prohibit cash payments; it includes anything of value, such as free or reduced-cost services, travel expenses, gifts, and the like. The government will not pay for treatments or tests that were ordered because of kickbacks.

The Stark Law

The Stark Law is similar to the AKS, but it is aimed at self-referrals. Essentially, the Stark Law prohibits healthcare providers from referring patients to entities with which the providers (or their immediate family) have a financial relationship, such as ownership. The Stark Law covers only “designated health services,” including clinical laboratory services; physical therapy, occupational therapy, and outpatient speech-language pathology services; radiology and certain other imaging services; radiation therapy services and supplies; durable medical equipment (DME) and supplies; parenteral and enteral nutrients, equipment, and supplies; prosthetic and orthotic devices and supplies; home health services; outpatient prescription drugs; and inpatient and outpatient hospital services. Although the language of the Stark Law mentions only Medicare, courts have generally extended its prohibitions to treatments covered by Medicaid, as well.

Applying the AKS and the Stark Law

Unlawful kickbacks are some of the most common elements of healthcare fraud schemes. Violations of the AKS and the Stark Law are often seen in the following areas:

  • Pharmaceuticals and medical devices. Drug manufacturers have developed various fraudulent schemes that keep drug prices high, resulting in record-setting profits. One type of fraudulent scheme involves paying doctors to prescribe certain drugs. These payments are often disguised as speaker fees, continuing medical education (CME) programs, or in-kind services.Likewise, manufacturers of medical equipment and devices will often pay healthcare providers—in cash or something else of value—to purchase their equipment, conduct medical procedures, or use their devices over those of their competitors. Sometimes, a healthcare provider will have a financial stake in the manufacturer of a medical device, potentially providing an incentive to overuse the device or conduct medically unnecessary treatments.
  • Patient Assistance Programs and copay cards. Government healthcare plans require patients to pay for only a small portion of the cost of the drugs they are prescribed, called a “copayment” or “copay.” The remainder of the cost (typically 80%) is covered by the government. This means that, if a patient can afford the copay, a drug manufacturer can earn a great deal of money from the government—and, ultimately, from taxpayers who are forced to foot the bill.As long as there have been insurance copay and co-insurance requirements, drug companies have worked to circumvent them, using tools such as discount coupons (called “copay cards” or “copay coupons”) to entice patients to use their brand name drugs rather than less expensive but equally effective treatments. The AKS prohibits the use of copay cards for government healthcare beneficiaries. The AKS also prohibits the drug manufacturers from using Patient Assistance Programs (PAPs) to funnel copayment assistance to patients.Although it might seem charitable to help patients afford their copays, drug companies are really motivated by profit. Drug companies consistently increase the prices of their drugs, and lifesaving treatments can often cost $100,000 or more annually. If their copays are covered, patients will continue taking these drugs regardless of their price, and drug companies will continue to bill the government for the bulk of the cost of the drug.
  • Laboratory tests. Diagnostic tests can be very lucrative for the laboratories performing them. The Stark Law generally prohibits a doctor from referring tests to his or her own laboratory, and the AKS prohibits a laboratory from paying anything of value to a doctor in exchange for ordering tests or sending those tests to be conducted at a particular laboratory.
  • Electronic health records. Electronic health record (EHR) software provides numerous opportunities for illegal kickbacks. Occasionally, an EHR company will provide financial incentives to healthcare providers to buy or promote that company’s EHR software. Other times, EHR companies will receive payments from pharmaceutical manufacturers to promote certain drugs through EHR software.

Recent Settlements

Kickbacks are extremely common in the healthcare industry, and the government has committed substantial resources to stopping kickback-related fraud. Recent settlements include:

  • In July 2020, Novartis paid over $642 million to resolve allegations that it paid unlawful kickbacks. The company allegedly used three charitable foundations as conduits to pay the copayments of Medicare patients. The company also allegedly hosted sham speaker events that were merely designed to launder cash payments to physicians who prescribed the company’s drugs at high rates.
  • In July 2019, three pharmaceutical companies paid over $122 million to resolve allegations that they used charitable foundations as conduits to pay the copayments of Medicare and CHAMPVA patients.
  • In October 2015, Millennium Health paid nearly $256 million to resolve allegations that it provided free items to physicians who agreed to refer expensive laboratory testing business to Millennium.
  • In March 2016, a medical equipment company paid $646 million to resolve civil and criminal liability related to multiple schemes. Among other misconduct, the company admitted that it paid remuneration in the form of grants, free trips, and free equipment to induce healthcare providers to purchase its medical equipment.
  • In January 2021, a software company paid $18.25 million to resolve allegations that it paid bribes to influence sales of its EHR product.
  • In January 2020, a software developer paid $145 million to resolve allegations that it solicited and received kickbacks from a major opioid company in exchange for programming its EHR software to influence physician prescribing of opioid pain medications.

Identifying Unlawful Kickbacks

Potential whistleblowers should ask themselves several questions:

  • Is a healthcare provider soliciting or accepting anything of value in exchange for providing treatment, making referrals, or doing anything else that will result in payments from government healthcare programs?
  • Is the healthcare provider’s independent clinical judgment being interfered with?
  • If a healthcare provider is being paid for providing services, are the payments at fair market value? Is a company disguising bribes as legitimate payments?

Whistleblowers are essential in identifying, reporting, and stopping kickback-related fraud. Whistleblowers are typically employees (or former employees) with inside information about fraud being committed. For example, an employee of a healthcare provider might have information that the provider has received kickbacks. In addition, an employee of a pharmaceutical company, laboratory, EHR company, or medical equipment or device manufacturer might learn that his or her company is paying kickbacks.

Sometimes, successful whistleblowers don’t have this type of inside information, but they still have reliable knowledge that a company or individual is engaging in fraud. Even non-employee “outsiders” or competitors often are able to use their technical knowledge to identify and report fraud. In any case, a whistleblower may be entitled to an award of 15%-30% of any amount recovered in a successful enforcement action. If you have evidence that a person or company is committing fraud related to kickbacks, an experienced whistleblower attorney can help you file an effective complaint and maximize your share of any recovery.

Our Team

With more than 30 years of experience, the attorneys on Baron & Budd’s whistleblower representation team have represented dozens of clients in government fraud cases returning over $5.4 billion to federal and state agencies, with whistleblower recovery shares as high as 49%. They are ready to help if you have evidence of kickback-related fraud.

Please call (866) 401-5971 or complete our contact form if you would like more information. For more information, see What You Need to Know About Becoming a Whistleblower.  Please understand that contacting us does not mean that you have established an attorney-client relationship with Baron & Budd, P.C.

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