TACKLING FALSE CLAIMS ACT AND ANTI-KICKBACKS IN THE DRUG AND MEDICAL DEVICE SECTOR
R&C: How would you describe the level of kickback activity involving US companies in the drug and medical device sector?
Richter: US companies in the drug and medical device sector are on the front lines fighting the coronavirus (COVID-19) pandemic and are again showing the extraordinary value they provide as for-profit enterprises. After many years of scrutiny and enforcement activity, and investment in compliance programmes, one would think that there would be fewer kickback investigations and cases year on year. Several realities contribute, however, to the continued presence and growth of investigations and cases involving alleged kickbacks, such as economic incentives that inherently conflict with the breadth of the anti-kickback statutes, the inability of economic actors and enforcers to draw a clear line under the statutes between lawful actions that generate goodwill with business partners and are deemed lawful and actions that may create incentives to the use of drugs and devices that are deemed unlawful, and the extraordinary financial incentives for lawyers and law firms to bring cases against drug and device companies. As these realities are not likely to change, we should expect cases involving allegations of kickback activity to continue and grow.
Maida: Anti-kickback statute enforcement has been of longstanding interest to the US government and private whistleblowers. I see no reason for that to diminish. The primary area of inquiry is the industry’s financial relationships with physicians, who are the gatekeepers for access to the industry’s products, either through prescribing drugs or influencing a hospital’s purchase of medical devices. The dynamic of industry needing to collaborate with physicians will likely increase over time as medical technology continues to become more complex. At the same time, the financial interest to pursue investigations and claims involving these arrangements will also likely continue to increase. The anti-kickback statute is quite broad in that it covers not just obvious ‘kickbacks’ but any ‘remuneration’ or thing of value offered, paid, solicited or received with the intent to induce or reward referrals or to arrange for or recommend the ordering or purchase of items or services paid for by federal healthcare programmes. By its terms, this statute is implicated by widespread and legitimate practices, including marketing. The regulations are largely limited to narrow ‘safe harbours’ that can protect arrangements that fit squarely within them, but unfortunately most legitimate arrangements do not. That means most arrangements are left to be analysed based on their facts and circumstances and the intent of the parties, which creates inherent ambiguities that can be open to interpretation.
Jul-Sep 2020 Issue
King & Spalding LLP
McDermott Will & Emery LLP