Seventh Circuit Clarifies the Bounds of Anti-Kickback Statute Elements
This week, the Seventh Circuit reversed a conviction under the Anti-Kickback Statute (AKS) because the payments at issue—to advertisers—did not reflect an intent “to induce.” United States v. Sorensen, No. 24-1557 (7th Cir. Apr. 14, 2025). The advertisers, after all, wielded no influence over healthcare decisions. And advertising cannot be an AKS-prohibited “referral” in the first place. In reaching these holdings, the Seventh Circuit notably circumscribed the “outer boundaries” of the AKS—violations of which are among the most important drivers of FCA liability.
The defendant owned and operated a distributor of durable medical equipment (DME). The defendant collaborated with a DME manufacturer and two marketing firms, which published advertisements for the manufacturer’s orthopedic braces. Interested patients responded with their personal information and their doctors’ contact information. The advertising firms then contacted the patients, collected additional information, and, with the patients’ consent, faxed prefilled but unsigned prescriptions to the patients’ physicians. If a physician signed a prescription, the defendant’s distributor collected the Medicare reimbursement and paid the manufacturer 79 percent. Out of that share, the manufacturer paid the advertising firms based on the number of leads generated.
A jury found the defendant guilty of AKS violations. After the trial court denied the defendant’s post-trial motions, he appealed.
The court’s analysis hinged on whether there was sufficient evidence that the defendant intended to “induce” within the meaning of the AKS. Paying a kickback to a physician, a payor’s intent to induce “can be clear,” held the Seventh Circuit. But here, the payments were made to advertisers. “In these less common cases, we consider whether a payee ‘leverage[s] fluid, informal power and influence’ over healthcare decisions”—such that “a physician’s choice of care becomes a formality rather than an exercise of independent medical judgment.” In the present case, there was “simply no evidence” that the paid advertisers “leveraged any sort of informal power and influence over healthcare decisions.” “The physicians retained full discretion to determine whether to prescribe the advertised care.” Indeed, “[c]ritical” to the court’s decision, “physicians who received the unsigned prescription forms then decided whether to sign and return the forms . . . or to ignore them.” Physicians declined 80 percent of the orders sent by one of the advertisers and regularly ignored forms sent by the other.
The court continued that advertising cannot be an AKS-prohibited “referral” in the first place. Instead, advertising is “best understood as proposals for care.” The court also determined that the advertising could not successfully undergird a theory under the AKS’s “recommendation” prong—on which courts have provided little guidance. “[T]o the extent” the advertising “might be deemed ‘recommendations’” prohibited by the AKS, “they were frequently overruled.” That distinguished this case from Polin, in which the Fifth Circuit held that payments to a sales representative did violate the AKS—his recommendations on pacemaker monitoring services had never been overruled by a physician in his fourteen-year career.
A copy of the Seventh Circuit’s opinion can be found here.
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