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 Law. Whistleblowers can work with the government to stop kickbacks and improper referrals 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 providers as specified by the Stark Law 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.

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.
  • 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.

Differences between the Anti-Kickback Statute and the Stark Law

The Anti-Kickback Statute and the Stark Law have key differences in what they prohibit and by whom, while sharing similar goals of protecting patients and preventing waste, fraud and abuse in government healthcare programs.

The Anti-Kickback Statute prohibits anyone from offering or receiving kickbacks in any form to induce or reward those who generate business involving the treatment of patients and services that are reimbursed by Medicare, Medicaid and other government healthcare programs. The Anti-Kickback Statute has some exceptions, referred to as “safe harbors.”

The Stark Law is more specific than the Anti-Kickback Statute. Stark prohibits physicians from referring Medicare and Medicaid patients for certain medical services to entities with which the physician or immediate family member has a financial relationship, with certain exceptions, or safe harbors. Stark does not require proof of intent.

Stark also prohibits health-industry entities from submitting claims to Medicare and Medicaid for services based on a physician referral prohibited by Stark.

Those who violate the Anti-Kickback Statute may be subject to criminal as well as civil penalties, while those who violate the Stark Law are subject to only civil penalties.

Violations of the Anti-Kickback Statute and the Stark Law also can be violations of the False Claims Act, and therefore could be the basis for a qui tam lawsuit.

Reporting medical kickbacks and Stark violations

If you are aware of medical kickbacks or Stark violations and would like to get a free, confidential review of your case by experienced whistleblower attorneys, 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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