The False Claims Act inherently views referrals in a suspect matter. The primary difference between the Anti-Kickback Statute (“AKS”) versus The Stark Law is that the AKS prohibits items of value for the referral of patients by others or in the pharmaceutical fraud context prohibits for freebies in exchange for the prescription of a product, whereas The Stark Law regulates self-referrals. The Stark Law has exceptions and exceptions to the exceptions regarding self-referrals, and also involves disclosures. The AKS has produced some of the largest False Claims Act settlements resulting in billions of dollars of recoveries for the taxpayer and has also imposed criminal consequences depending on the severity or value of the inducement scheme. Both laws apply to entities that accept government insurance programs like Medicare and Medicaid or Tricare and are not applicable to private insurance.
The purpose of the AKS, according to its mission statement, was to “ensure that clinical decisions and medical services are provided to patients based on their medical needs and not on the improper financial considerations of providers.” It is such an important tenet that the appearance of the conflict is sufficient enough to warrant liability.
The Anti-Kickback Statute
The Anti-Kickback Statute, 42 U.S.C. 1320a-7b(b), applies to all medical professionals who are in a position to recommend or arrange for the provision of medical services. “Any item or service for which payment may be made in whole or in part under a Federal health care program” is referred to as a “referral” under the Anti-Kickback Statute and is prohibited. While it may be acceptable to provide incentives to bona fide employees under the AKS, giving incentives or inducements to third parties who are independent contractors or who otherwise don’t work for the health care practitioner are expressly forbidden.
Examples of Kickbacks include:
- Offering a commission or other financial incentive in exchange for prescribing a particular medication or medical device.
- Providing a healthcare provider with free goods or services in exchange for their referral of patients.
- Offering a physician a free vacation or other non-monetary incentive in exchange for prescribing a particular medication or medical device.
- Providing a healthcare provider with excessive compensation for services. Sometimes referred to as a Fair Market Value violation.
- Offering a healthcare provider a payment to attend a conference or seminar that is really just a disguised vacation.
- Providing a healthcare provider with gifts, such as expensive meals or sports tickets, in exchange for prescribing a particular medication or medical device.
- Offering a healthcare provider a discounted rate on a product or service in exchange for their referral of patients.
- Providing a healthcare provider with a “finder’s fee” or other incentive for referring patients to a particular healthcare facility or provider.
- Offering a healthcare provider a kickback in exchange for using a particular laboratory or imaging facility.
- Providing a healthcare provider with free samples of medication or medical devices in exchange for their prescription or use of the product.
- The use of rebates as a disguised means of compensation.
- Waiving co-payments.
The Stark Law
The Stark Law was passed to address the perception of medical necessity and judgment for a health care practitioner (HCP) who refers a patient to a derivative entity in which the HCP has a financial interest without fully disclosing the economic relationship. In some instances even with disclosure the referral may be outright prohibited. Medical judgment may be compromised if the HCP has additional economic incentives to send a patient to an entity in which it also has an economic interest. According to the Stark Law also known as physician self-referral law, 42 U.S.C. 1395nn, some “referrals” are permitted for a select group of medical services, referred to as “designated health services,” such as lab testing, hospital services, prescription drugs, and durable medical equipment if properly disclosed in the right manner. However, before engaging in anytime of self-referring mechanism it’s critical not to rely on online information and instead seek a legal opinion to make sure the conduct is lawful.
A comparison of the Stark Law and the Anti-Kickback Statute
While the Anti-Kickback Statute and the Stark Law both aim to stop financial incentives from influencing medical referrals, their respective penalties are very different. The Anti-Kickback Statute is a criminal law with civil penalties as well. The Stark Law is a civil law that carries even greater monetary penalties but no threat of imprisonment.
The Stark Law forbids medical professionals like doctors, dentists, and chiropractors from referring patients to anyone they or a family member have a financial relationship with. Only patients covered by Medicare and Medicaid are subject to the Stark Law.
What Are the Penalties under Anti-Kickback Statute Violations?
Violations of the Anti-Kickback Statute can result in criminal charges, such as up to five years in prison, as well as civil penalties of up to $25,000 per claim. Additional penalties of $10,000 to $50,000 per violation are possible under the Civil Monetary Penalties Law (CMPL). Furthermore, health care providers convicted of violating the Anti-Kickback Statute may be barred from future Medicare and Medicaid program coverage. More likely, however, is for whistleblowers who are aware of kickbacks to file a case under the False Claims Act and ask for the imputation of damages of three times the billing that were traceable to the kickbacks.
What Are the Penalties under Stark Law Violations?
Penalties for Stark Law violations include denial of payment for DHS provided, refund of monies received by physicians and facilities for amounts collected, payment of civil penalties of up to $15,000 for each service provided in violation of the law, and three times the amount of improper payment the entity received from the Medicare program, and exclusion from the Medicare program and/or state healthcare programs. Under the False Claims Act, the government can ask for treble damages based on the aggregate value of the prohibited referrals.
Anti-Kickback Settlements Under the False Claims Act – Sample Anti-Kickback Whistleblower Awards.
Some of the largest False Claims Act settlements stem from use of the Anti-Kickback Statute. Here are some representative FCA AKS settlements with some sample whistleblower rewards:
GlaxoSmithKline (GSK) – In 2012, GSK agreed to pay $3 billion to settle civil and criminal charges related to the promotion of several prescription drugs, including Paxil, Wellbutrin, and Avandia. The case involved allegations that GSK paid kickbacks to healthcare professionals to prescribe these drugs and promote them for uses that were not approved by the FDA, commonly known as an off label promotion violation. For example, GSK allegedly paid doctors to give speeches about off-label uses of the drugs and then billed these events as educational programs. The whistleblowers in this case were worked for GSK and received a $168 million whistleblower award for their role in exposing the company’s illegal activities.
Pfizer – In 2009, Pfizer agreed to pay $2.3 billion to settle allegations of off-label marketing and kickbacks involving several prescription drugs, including Bextra, Geodon, and Lyrica. The case involved allegations that Pfizer paid kickbacks to healthcare professionals to prescribe these drugs and promoted them for uses that were not approved by the FDA. For example, Pfizer allegedly paid doctors to give promotional talks about the drugs and then rewarded them with trips to resorts and other perks. The whistleblowers in this case received $102 million in whistleblower rewards for their role in exposing the company’s illegal activities.
Johnson & Johnson (J&J) – In 2013, J&J agreed to pay more than $2.2 billion to settle allegations of off-label marketing and kickbacks related to several prescription drugs, including Risperdal, Invega, and Natrecor. The case involved allegations that J&J paid kickbacks to healthcare professionals to prescribe these drugs and promoted them for uses that were not approved by the FDA. For example, J&J allegedly paid doctors to prescribe Risperdal to elderly patients with dementia, even though the drug was not approved for that use and had serious side effects. The whistleblowers in this case received a False Claims Act whistleblower award of $167.7 million for their role in exposing the company’s illegal activities.
Novartis – In 2015, Novartis agreed to pay $390 million to settle allegations that it paid kickbacks to specialty pharmacies to boost sales of two prescription drugs, Exjade and Myfortic. The case involved allegations that Novartis paid the pharmacies to switch patients from competing drugs to its own products and to waive patient copayments. The whistleblowers in this case received $49.67 million in whistleblower rewards for their role in exposing the company’s illegal activities.
Abbott Laboratories – In 2012, Abbott Laboratories agreed to pay $1.5 billion to settle allegations of off-label marketing and kickbacks involving several prescription drugs, including Depakote, TriCor, and Lupron. The case involved allegations that Abbott paid kickbacks to healthcare professionals to prescribe these drugs and promoted them for uses that were unapproved. For example, Abbott allegedly paid doctors to attend meetings at resorts and provided them with tickets to sporting events and other perks. The whistleblowers in this case received $84 million as a whistleblower award for their role in exposing the company’s illegal activities.
What Is Prohibited by the Anti-Kickback Statute?
The federal Anti-Kickback Statute prohibits:
- Accepting or tendering payments in exchange for Medicare or Medicaid patients.
- Marketing/Advertising/Sales Personnel: It is illegal in the medical field to attempt to market “off-label” uses for pharmaceuticals or to propose incentive schemes to increase referrals.
- Patients: It is illegal to provide any financial incentive for the purchase of medical goods or services covered by government-funded insurance.
- Management: If office administrators or procurement staff for medical offices accept rent or advertising discounts or similar discounts and gifts from interested parties, they may be in violation of the Anti-Kickback Statute.
- Providing items above free market value to induce business.
- Providing freebies to induce business.
- Secretly giving rebates.
- Waiving co-payments as a means to induce use of a product or service.
Speak with an Anti-Kickback Whistleblower Lawyer
The Anti-Kickback Statute is a complex and broad area of law that includes both criminal and civil penalties. With the potential for criminal implications on the one hand and a large economic recovery for whistleblower on the other, when in doubt, consult a qualified whistleblower lawyer to discuss conduct that may constitute a kickback so you can know your rights and options. Contact our firm at (877) 561-0000 or schedule a free confidential consultation.