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The False Claims Act Kicks Back on Kickbacks Pretty Hard

January 25, 2024

Individuals aware of kickbacks have received hundreds of millions of dollars as False Claims Act whistleblower rewards for disclosing the unlawful practices through a qui tam law firm.  Kickbacks are not immediately apparent from a glance, as they involve secretly providing inducements for business, which can happen in a variety of schemes. They are outright illegal under the False Claims Act, since if someone is receiving an inducement, it compromises the perception of their impartiality, and the public is left wondering whether the entity is behaving properly or is influenced by the kickback itself. Even if they did behave properly, there’s an appearance of impropriety which undermines confidence in the system, which is why the Anti-Kickback Statute (AKS) prohibits kickbacks when it comes to government funds.

The United States views kickbacks as both civil and criminal, so the entity engaging in such a scheme better be cognizant of these realities, or they might face stiff civil and criminal penalties. The False Claims Act (FCA) calls for triple damages, and AKS violations are explicitly implicated through the FCA, so the sum of the paid billing affected by the inducements tripled may be considered the measure of damages with an insider who blows the whistle on a kickback scheme eligible to receive up to 30% of what the government recovers under the FCA.

Sometimes an industry is so incestuous, with so many engaging in similar schemes, that one challenge is raising awareness, since the workforce may mistakenly believe that giving free tickets to prescribe a medicine, or having some sort of sham medical directorship for Medicare patients is lawful, when in fact it’s not.  With so much at stake and potential criminal charges if you’re aware of and participating in a kickback scheme, you better consult with a skilled anti-kickback law firm as soon as you become aware of a problem, or else your liberty may be compromised by such a financial arrangement.

Kickbacks involving government funds tend to happen in the following fields:

Medicare Fraud – For example, in return for referrals, a provider offers financial incentives, or gifts to physicians, compromising the impartiality of medical decisions thereby leading to unnecessary Medicare claims.

Medicaid Fraud – For example, an illegal runner is given money for each patient they refer to a clinic or the clinic provides free trips with accommodations to its opiate patients to keep them addicted and having the product prescribed.

Pharmaceutical Fraud – The company offers financial incentives, expensive gifts, or even all-expense-paid trips to encourage physicians to favor its drug over equally effective, lower-cost alternatives, leading to increased costs for government healthcare programs. Some of the biggest cases were Pharmaceutical Fraud False Claims Act settlements, wherein drug companies gave their sales forces lofty budgets to woo physicians to prescribe their products, which could manifest as vacations, events, or perhaps overpriced speaking engagements containing fees that correlate to the extent of the prescriptions.

Defense Contractor Fraud – A defense contractor secures a government contract through kickbacks during the procurement process. In exchange for the kickbacks, the contractor’s bid is favored, leading to inflated costs for the government, and compromised integrity in defense procurement.

Further, a defense contractor who secures a lucrative government contract via engaging in a kickback scheme by way of bribing a foreign entity may trigger the provisions of the Foreign Corrupt Practices Act (FCPA), which also may be addressed through the FCA since it may have influenced the contracting process.

GlaxoSmithKline (GSK) Settlement (2012):

GSK reached a $3 billion settlement with the U.S. government, that included allegations of kickbacks to healthcare professionals, and off-label promotions of certain drugs. Off-label promotions are common in the pharmaceutical industry. There is a rigorous approval process for pharma products, and rigid rules regarding what a product may be approved to treat, however, sometimes a product may (or may not) have an unexpected benefit, and the drug company may promote the product around the unexpected benefit instead of what it was approved for, which is an unlawful, and dangerous practice known as off-label promotion.  The off-label promotion often goes hand-in-hand with kickbacks because the drug company is essentially doing anything and everything it can to obtain a market share, whilst disregarding the guardrails.

GlaxoSmithKline LLC to Pay the Largest Health Care Fraud Settlement in U.S. History at the Time

GSK faced allegations of providing financial incentives and perks to healthcare professionals, including cash payments, gifts, and lavish trips. These inducements were intended for encouraging physicians to prescribe GSK medications for off-label uses and for boosting sales.  Under the False Claims Act, this kickback settlement stimulated a potential whistleblower reward in the hundreds of millions of dollars.

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Tenet Healthcare Settlement (2006):

In the case of Tenet Healthcare, kickbacks were associated with payments made to physicians in exchange for patient referrals to Tenet hospitals and clinics. The financial incentives took various forms, including direct payments, sham contracts, and other remuneration designed to reward physicians for steering patients to Tenet facilities. The case settled for over $900 million($725million plus interest), which meant the insiders were eligible for up to a $270million whistleblower reward.

#06-406: 06-29-06 Tenet Healthcare Corporation to Pay U.S. more than $900 Million to Resolve False Claims Act Allegations (justice.gov)

Johnson & Johnson Settlement (2013):

J & J allegedly paid kickbacks to nursing homes for prescribing certain antipsychotic drugs.  These incentives came in the form of rebates, grants, and other payments, encouraging nursing homes to promote the off-label use of certain antipsychotic drugs manufactured by Johnson & Johnson. J & J subsequently paid $2.2 billion to settle the claim under the False Claims Act, which could conceivably generate a whistleblower award of a couple hundred million dollars.

Johnson & Johnson to pay $2 billion in false marketing settlement (cnn.com)

Adventist Health System Settlement (2015):

Adventist Health System faced allegations of financial arrangements with physicians constituting kickbacks for patient referrals and agreed to pay $118.7 million to settle the allegations. The financial incentives included payments, perks, and other remuneration designed to induce physicians for Medicare and Medicaid patients.

Adventist Health System Agrees to Record Settlement in Whistleblower Lawsuit – Spectrum Magazine

These examples illustrate the variety of financial incentives used in kickback schemes, ranging from direct payments and grants to discounts and lavish gifts, further illustrating the significant whistleblower rewards available for individuals busting open these schemes. The common thread is the intent to influence medical decision-making and encourage referrals in ways that compromise the objectivity of healthcare professionals, and drive revenue for the entities involved.  When you see the big bucks in play, and the ability to pay these large settlements, you see that big pharma has incentives to try to obtain market shares with billion-dollar products. Those billions in sales have the effect of kicking back against the kickback as they wind up paying large amounts to resolve their schemes, while the whistleblowers responsible for sharing the intelligence obtain large rewards for their work.  In short, if you’re thinking about doing a kickback when federal funds are implicated, think twice, and if you know of a scheme like this you need to consult with a False Claims Act kickback lawyer to help solve the problem, and do so before the government thinks you’re part of the problem, rather than the catalyst for the solution.

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