DOJ Reaches Settlement with OraPharma, Inc., Pushing Novel AKS Theory
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.
Court Rejects Application of the Public Disclosure Bar Due to DOJ’s Opposition
On January 24, 2023, the United States District Court for the Middle District of Florida denied a motion to dismiss a qui tam suit premised on Anti-Kickback Statute (“AKS”) allegations, explaining that it could not dismiss the case because DOJ and several interested states had filed oppositions to application of the public disclosure bar. See United States ex rel. Marcus v. BioTek Labs, LLC, No. 8:18-cv-2915 (M.D. Fla. Jan. 24, 2023).
Fourth Circuit Underscores the Risk of Commission-Based Compensation Agreements with Independent Contractors
In a recent decision, the Fourth Circuit Court of Appeals for the second time in two years held that commission-based compensation arrangements with independent contractors cannot be safe harbored and do violate the Anti-Kickback Statute and FCA. See United States ex rel. Nicholson v. Medcom Carolinas, Inc., No. 21-1290 (4th Cir. July 21, 2022).
Eighth Circuit Holds that AKS Violations Do Not “Taint” All Claims
The Eighth Circuit Court of Appeals recently issued a notable decision that offers defendants in FCA cases premised on violations of the Anti-Kickback Statute (“AKS”) significant new defenses relating to causation. The panel soundly rejected the government’s position that as a result of the 2010 amendments to the AKS, any claim provided in violation of the AKS is tainted, and therefore “false,” under the FCA. Instead, the Eighth Circuit held that for an AKS violation to render a claim false, the kickback must have been the but-for cause of the submission of the claim. United States ex rel. Cairns v. D.S. Medical LLC, No. 20-3010, 2022 WL 2930946 (8th Cir. July 26, 2022). The decision creates a circuit split with the Third Circuit and given the many courts of appeal that have not weighed in on this question, promises to generate renewed debate in district courts across the country as to the appropriate causation standard in FCA cases involving alleged violations of the AKS.
Recently Unsealed Complaint Reinforces Potential Liability of Private Equity Investors in the Healthcare Industry
Recently, a court in the Central District of California unsealed a qui tam complaint against several specialty pharmacies and their private equity fund owners. See United States ex rel. Webster v. BioMatrix Holdings, LLC, 2:18-cv-09333-PSG-PLA (C.D. Cal. Oct. 31, 2018). Relator, a former Vice President for Managed Care at BioMatrix Specialty Pharmacy, alleged that the specialty pharmacy defendants (collectively “BioMatrix”), with the knowledge of their private equity owners, employed a kickback scheme to increase the number and value of prescriptions for hemophilia medications filled through their pharmacies. (more…)
Settlement Highlights Ongoing Interest in Kickbacks Affecting Non-Federal Healthcare Programs
Earlier this week, two laboratory testing companies paid $42.25 million to resolve allegations that they violated the California and federal FCAs, as well as the California Insurance Frauds Prevention Act (“CIFPA”), by paying kickbacks to induce physicians to order a specialized lab test for auto-immune and inflammatory diseases. The kickbacks allegedly took the form of inflated processing fees and caps on patient cost-sharing obligations. See United States ex rel. STF, LLC v. Crescendo Bioscience, Inc., No. 16-cv-2043 (N.D. Cal.). DOJ and the State of California declined to intervene, and the laboratory testing companies entered into this settlement with the relator to resolve ongoing litigation. The settlement highlights increasing enforcement risk arising from kickback allegations affecting non-federal healthcare programs, which are not directly subject to the Anti-Kickback Statute or the FCA. (more…)
District Court Again Dismisses Anti-Kickback Statute Claim Related to Medical Devices Used in Bariatric Surgeries
A court in the District of Maryland again dismissed a declined qui tam action in which the relator, a bariatric surgeon, alleged that two medical device companies violated the AKS by providing surgeons with free advertising in exchange for physicians using the companies’ LAP-BAND medical devices in bariatric surgeries. See United States ex rel. Fitzer v. Allergan, Inc., 17-cv-00668 (D. Md. Mar. 22, 2022). Relator fared no better on his third attempt; as the court found, he failed to adequately plead presentment and causation. (more…)
Court Agrees With DOJ That FMV Payments Can Be Kickbacks
On February 23, 2022, a district court in the Central District of California denied a defendant’s motion to dismiss a qui tam suit premised on alleged Anti-Kickback Statute (“AKS”) violations, holding that “even some fair-market-value payments will qualify as illegal kickbacks.” See United States ex rel. Chao v. Medtronic PLC, No. 17-cv-1903 (C.D. Cal.).
The relator’s operative complaint argued that the defendant, a manufacturer of medical devices, violated the FCA by offering kickbacks in various forms to reward physicians for using the defendant’s devices. Among other arguments, the defendant urged the court to dismiss the complaint because the relator failed to allege that certain payments to physicians for proctoring other physicians on how to use the medical devices exceeded fair market value (“FMV”). As such, the defendant contended, the relator failed to address the potential applicability of the AKS’s personal services safe harbor. (more…)
Recent Settlement Illustrates Enforcement Risks Associated With Physician Roll-Ups
On December 2, 2021, the Department of Justice (“DOJ”) issued a press release announcing that Flower Mound Hospital Partners (“Flower Mound”), a partially physician-owned hospital, agreed to pay just over $18 million to resolve allegations that it had violated the False Claims Act by submitting claims that violated the Stark Law and the Anti-Kickback Statute. (more…)
