16 September 2021

District Court Rejects Anti-Kickback Statute Claim Due to “Conclusory” Assertions of Unlawful Intent

A court in the District of Maryland recently 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., et al., 1:17-cv-00668-SAG (D. Md. Sept. 10, 2021).  The court’s decision granting defendants’ motions to dismiss is notable in its refusal to allow relator to proceed based on conclusory allegations that the defendants knew they were acting in violation of the AKS.

Relator alleged that the defendants operated a website that provided free advertising and marketing to bariatric surgeons who used LAP-BANDs.  Among other features, the website included a physician locator that directed patients to local bariatric surgeons who had the skills and training necessary to implant the device.  Relator alleged that the physician locator actually functioned as a kickback scheme “by providing surgeons with valuable free advertising on [the website] in order to induce surgeons to recommend Defendants’ . . . medical device instead of alternative operations.”

Specifically, relator alleged that physicians would only be listed on the website if they agreed to meet a quota of surgeries, which during the relevant time period was 40 surgeries per year.  After defendants added relator to the physician locator in June 2012, relator claimed that he immediately experienced increased patient interest.  However, defendants removed relator from the physician locator in March 2013 because, relator alleged, an Account Manager informed him that he had not met the yearly quota.  Relator claimed that the free advertising from the website along with the yearly quota imposed by defendants for continued placement on the physician locator ensured that physicians would purchase more devices than they otherwise would, and thus defendants caused these physicians to submit false claims tainted by AKS violations.

After finding that the first-to-file bar did not prevent the court from exercising jurisdiction over relator’s claims, the court turned to the AKS allegations.  The court ultimately concluded that relator had not alleged facts suggesting that defendants acted “knowingly and willfully” or that the alleged remuneration was provided with the intent to induce device purchases.  With regard to the requirement that defendants act knowingly and willfully, relator alleged that defendants were familiar with the AKS and knew that the surgeons on the physician locator would be required to certify compliance with the AKS before submitting claims for reimbursement.  Relator also claimed that one defendant placed disclosures on the website addressing the AKS referral services safe harbor.  But the court explained that awareness of the AKS “says nothing about whether [defendants] were acting with an unlawful intent while operating the . . . website.”

With regard to the AKS requirement that defendants act with intent to induce referrals, relator alleged that “at least one purpose of [defendants’] exclusive website marketing scheme was to increase the number of . . . procedures performed and therefore [their] own sales.”  The court declined to credit this allegation, finding that it was a “legal conclusion unsupported by any factual allegations.”  In particular, while relator alleged that an intent to induce referrals was the only reason the defendants would implement a quota for the website, the court determined that the relator had not pled facts necessary to support the allegation that the patient care justifications for the quota were mere “pretext.”

The court concluded by noting that relator could be correct that defendants’ physician locator was created with an intent to sell more devices, but that relator alleged no specific facts to support his assertions.  This opinion highlights that “conclusory allegations [that] raise a mere possibility rather than a plausibility” that defendants acted with the requisite intent are not enough to sustain a violation of the AKS.

The court’s opinion can be found here.

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