Earlier this month the U.S. Attorney’s Office for the District of Massachusetts announced a $100,000 FCA settlement resolving novel allegations that a pharmaceutical company violated the Anti-Kickback Statute (“AKS”), and thereby caused the submission of false claims, through incentive compensation payments to its employees for conduct outside the scope of the employee relationship.
The investigation arose from a qui tam complaint alleging that OraPharma violated the FCA by wrongly instructing dental providers to bill Medicare Part D and erroneously double-bill dental insurance for OraPharma’s drug, Arestin. See U.S. ex rel. Megan Rumble v. OraPharma, Inc., No. 19-cv-10998 (Apr. 26, 2019). The complaint also alleges that OraPharma employed Registered Dental Hygienists as sales representatives, and that some of these Registered Dental Hygienists actively continued to practice in their own territories, allowing them to influence dentists’ prescribing decisions. The qui tam complaint does not frame this conduct as a violation of the AKS, but rather as an inappropriate means of steering prescribing decisions.
The settlement agreement does not address the billing allegations in the qui tam complaint and instead solely resolves claims based on allegations that the Registered Dental Hygienist sales representatives “may have received, or were eligible to receive, incentive compensation for Arestin prescriptions that they may have recommended to Medicare beneficiaries when the account managers were performing dental hygienist duties in a dental office—i.e., while operating outside the scope of their employment with OraPharma.” Ordinarily, compensation to employed sales representatives should be protected by the employee safe harbor to the AKS. DOJ’s apparent rejection of this safe harbor is novel. Even more notably, the company many not even have been fully aware of these practices, because although “some of these dental hygienists worked occasionally in a dental office or offices in their assigned sales territories [they] did not disclose in certain instances this occasional hygiene practice to OraPharma as required under the company’s conflicts-of-interest policies.” Thus, it seems unlikely that DOJ could have established a willful violation of the AKS and knowing submission of false claims if put to the task.
A copy of the settlement agreement is available here.
This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.