Why are pharmaceutical & medical kickbacks prohibited?

The False Claims Act offers whistleblowers an effective way to expose and stop pharmaceutical and medical kickbacks in the healthcare system. Kickbacks – hidden financial arrangements between doctors and hospitals or other healthcare providers or companies – are one of the most complicated and troubling aspects of the healthcare system.

Kickbacks to doctors or other healthcare providers are prohibited by two federal laws: the Anti-Kickback Statute and the Stark Statute. Whistleblowers can work with the government to stop kickbacks and receive a reward by filing a “qui tam” lawsuit under the False Claims Act.

Medical and pharmaceutical kickbacks come in many forms. But in every kickback case, healthcare providers will provide some material benefit in return for other providers prescribing or using their products or services.

In most instances, kickbacks are illegal. Doctors are supposed to decide on the most appropriate treatment for their patients without consideration of their own financial interests. Federal laws prohibit kickbacks and improper compensation to doctors and other healthcare provider as specified by the Stark Statute because those financial incentives often result in medically unnecessary treatment and the use of more expensive products. That in turn results in higher costs to patients, Medicare, Medicaid and other healthcare insurance programs.

The Anti-Kickback Statute

Under the Anti-Kickback Statute, a company commits fraud when it offers doctors and other healthcare providers financial incentives to use the company’s products or services, for which payment may be made under Medicare, Medicaid or other federally funded healthcare programs. The illegal kickbacks can be cash payments, but often include other items of monetary value, such as gifts, free or discounted supplies or services, and travel.

Hospitals and other companies often try to disguise their medical kickbacks as legitimate payments. For example, they might pay doctors inflated rates for speaking engagements or pay above fair market value to lease office space. Even if there is a lawful basis for a payment, the financial arrangement may still be fraudulent if one purpose of the payment is to influence a doctor or other healthcare provider to use the company’s products or services.

The Stark Statute

Another law, called the Stark Statute, regulates the financial relationship that a physician or other provider can have with companies that sell healthcare items or services. When doctors or other healthcare providers benefit financially from referring patients to a particular hospital or testing center, they are incentivized to send patients for medically unnecessary, sometimes dangerous treatments.

The Stark Statute tries to prevent subjecting patients to unnecessary treatments, making it illegal for physicians to refer Medicaid or Medicare patients to any entity with which it has a financial relationship, such as ownership, investment interest or compensation arrangements.

Anti-Kickback Statute – examples of medical kickback cases

Phillips & Cohen has represented whistleblowers in many Anti-Kickback Statute and Stark Act cases that have recovered big sums and earned our whistleblower clients substantial rewards. Here are some examples of our qui tam cases involving the Stark Law and Anti-Kickback Statute:

  • GlaxoSmithKline ($3 billion settlement of charges involving kickbacks and off-label marketing). Although most of the allegations against Glaxo involved illegal and harmful off-label marketing practices, Phillips & Cohen’s qui tam lawsuit also alleged that Glaxo attempted to disguise illegal kickbacks to doctors by calling them speaker fees and payments for attending advisory meetings.
  • TAP Pharmaceuticals ($875 settlement). Phillips & Cohen’s whistleblower lawsuit alleged that TAP paid illegal kickbacks, such as free televisions and seminars at resorts, to doctors to prescribe Lupron, its prostate-cancer drug.
  • DaVita Healthcare Partners ($400 million settlement). Phillips & Cohen’s qui tam lawsuit alleged that DaVita paid doctors kickbacks in exchange for patient referrals to its dialysis clinics. DaVita allegedly hid these illegal payments in a number of ways, including paying more than fair market value to purchase shares in physician-owned dialysis centers and selling physicians shares in existing DaVita dialysis centers for less than fair-market value.
  • Adventist Health System ($118.7 million settlement). Phillips & Cohen’s whistleblower clients exposed an alleged scheme to pay doctors excessive compensation in return for patient referrals to Adventist hospitals, clinics, and other outpatient services in Florida, North Carolina, Tennessee and Texas.
  • Boehringer Ingelheim Pharmaceuticals ($95 million settlement). Phillips & Cohen’s qui tam lawsuit alleged that the pharmaceutical manufacturer used many illegal marketing schemes to induce physicians to prescribe their drugs, including a kickback program.
  • Medical device company C.R. Bard Inc. ($48.2 million settlement). Bard allegedly offered doctors many forms of kickbacks, including unrestricted “grant” money, rebates, advertising campaigns and free medical equipment.

Phillips & Cohen also has brought successful whistleblower cases involving kickback allegations against blood testing labs, pharmacies, hospitals, nursing home chains and others in the healthcare industry.

If you are aware of kickbacks and would like to get a free, confidential review of your case, please visit our contact page. Phillips & Cohen works with whistleblowers on a contingency basis, which means there is no payment unless the government recovers funds from the case and pays the whistleblower a reward.

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