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The Anti-Kickback Act: BU Law Class

September 28, 2017

In the BU Law School Health Care Fraud and Abuse seminar, the topic this week is the anti-bribery law known as the Anti-Kickback Act, a criminal statute. The law prohibits the solicitation, receipt, or offering of “any remuneration,” direct or indirect, in cash or in kind between a vendor of drugs or devices and a provider (doctor or hospital) if such remuneration is tied in some way to referrals of business. It is a sweeping statute, designed to stop economic influences from driving physicians’ medical decisions.

When does the Anti-Kickback Act Apply?

There are all sorts of cases that have arisen under this law.  These range from brazen cash-under-the-table bags of cash to much more subtle forms of “inducement”. Regulated industries have adopted voluntary codes of conduct on this topic. Moreover, virtually every pharmaceutical company compliance plan addresses this issue in some form or another. But still companies keep getting in trouble.


Companies Incentivize Fraud Through Weak Compliance Systems

Part of the reason is that very few companies have adopted any alternative to the traditional eat-what-you-kill model of compensating their sales representatives. Generous bonus structures usually allow sales reps to greatly increase their compensation if they tear the cover off the ball in selling the product. Companies regard representatives who hit high numbers, as heroes.  They often fail to scrutinize anomalous results when they are beneficial. Similarly they treat representatives who do not push the envelope as laggards and may let them go.

One thing should be clear, though. It is not the sales reps who drive the numbers game; they are simply the troops following the orders. Management, who often has investor and Wall Street expectations in mind, sets sales targets.  This creates an inherent tension between profit maximization and compliance with the law. Companies that run afoul of the Anti-Kickback Act fail to manage that tension.

Real World Example Of Anti-Kickback Statute Considerations

This week students received the following assignment:

Assume that two products, equivalent in every way that matters (safety, efficacy, price, ease of administration), exist in the market. Two competing companies who care very much about market share sell them.  The companies aggressively market the drugs and want to ensure that the competitor doesn’t increase its market share to their detriment. The question arises: how can we get more doctors to write our drug rather than the competitor’s? In light of the Anti-Kickback Act, what can you do to get their attention and potentially influence their prescription writing practices, without running afoul of the Anti-Kickback Act?

Answers included:

Major advertising expenditures, both in television, trade journals, magazines and social media.

Attractive branding and naming of the product.

Making targeted charitable donations to earn goodwill in the community of patients and providers.

Hiring (or continuing to hire) very good looking, outgoing, friendly sales reps. (This suggestion was partly in jest, but only partly!)

Offering free screenings to patients.

Offering direct-to-consumer coupons to prospective patients.

Determining whether any beneficial arrangements can be made with third parties, such as pharmacies, group purchasing associations, wholesalers, and pharmacy benefit managers.

Welcome to the world of trying to make a profit while staying out of serious trouble. It’s tricky out there!

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