Articles Posted in Anti-Kickback

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The Department of Justice (DOJ) recently announced a plea agreement regarding an alleged $73 million scheme to defraud Medicare that illustrates some of the pitfalls of compliance with the Anti-Kickback Statute (AKS). DOJ alleged that the owners of a clinical laboratory, Panda Conservation Group, LLC, and a telemedicine company, 1523 Holdings LLC, conspired to pay kickbacks in exchange for work arranging telemedicine providers to order genetic testing at Panda’s laboratories. While the parties had an agreement for IT and consultation services, DOJ alleged that this contract was a “sham” to hide the kickback payments and that the telemedicine company abused temporary, pandemic-responsive amendments to telehealth restrictions to refer beneficiaries to the laboratory for expensive and medically unnecessary cancer and cardiovascular genetic testing.

The Anti-Kickback Statute (42 U.S.C. § prohibits a person from knowingly offering, paying, soliciting, or receiving anything of value to induce or reward referrals for services covered by a Federal Healthcare Program. A Federal Healthcare Program is any program that provides health benefits, whether directly or through insurance, which is funded by the United States Government or any State health care program. A violation of the Anti-Kickback statute is a criminal offence and can carry severe penalties, including fines, prison sentences, and potential exclusion from participation in Federal Healthcare Programs in the future.

Since some referrals are necessary to optimize patient care, the Statute provides exceptions called “safe harbors” that permit certain arrangements that follow specific requirements. In the event an arrangement does not meet a safe harbor requirement, the arrangement will be considered on a case-by-case basis. Special care must be taken structure arrangements to comply with the AKS and its safe harbors.

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The Pharmaceutical Research and Manufacturers of America (PhRMA) issued an updated August 2021 Code on Interaction with Health Care Professionals, which takes effect January 1, 2022. Section 7 of the PhRMA Code’s guidance on speaker programs largely echoes a Special Fraud Alert regarding health care speaker programs which was issued by the Department of Health and Human Services’ (HHS) Office of Inspector General (OIG) in November 2020. The focus here is on programs where health care professionals (HCPs) participate in company-sponsored speaker programs in order to help educate and inform other health care professionals about the benefits, risks, and appropriate uses of company medicines. Similarly to the Special Fraud Alert, the PhRMA Code raises significant concerns about companies offering or paying remuneration (and HCPs soliciting or receiving remuneration) in connection with speaker programs in violation of health care fraud and abuse laws, such as the Anti-Kickback Statute.

A primary focus of the PhRMA Code’s speaker program guidance involves situations where attendees of such programs are offered meals incident to attendance. In general, the Code explains that incidental meals of modest value may be offered to attendees of company-sponsored speaker programs, subject to some non-exhaustive principles. The purpose of the speaker program should be to present substantive educational information designed to help address a bona fide educational need among attendees, taking into account recent substantive changes in relevant information or the importance of the availability of such educational programming. According to the PhRMA Code, only those with a bona fide educational need for the information should be invited and incidental meals furnished to attendees must be modest as judged by local standards, as well as subordinate in focus to the educational presentation. Companies should not pay for or provide alcohol in connection with the speaker program. Speaker programs should occur in a venue and manner conducive to informational communication, and a company representative should be physically present. Luxury resorts, high-end restaurants, and entertainment, sporting, or other recreational venues or events are cautioned against. Repeat attendance at a speaker program on the same or substantially the same topic is generally not appropriate, unless the attendee has a bona fide educational need to receive the information presented, including attendance by speakers as participants after speaking at such programs. Friends, significant others, family members, and other guests of a speaker or an invited attendee are not appropriate attendees unless such individuals have an independent, bona fide educational need to receive the information presented. To note, the PhRMA Code does not address attendance at a speaker program that does not include an incidental meal to the attendee.

The PhRMA Code also sets out four general principles that apply to companies’ retention of HCPs as speakers at company-sponsored speaker programs. First, HCPs may be engaged by companies as speakers for company-sponsored speaker programs to help educate and inform other HCPs who have an independent, bona fide educational need to receive information about the benefits, risks, and appropriate uses of company medicine and related disease states. Second, company decision regarding the selection or retention of HCPs as speakers should be made based on defined criteria such as general medical expertise, reputation, knowledge, experience regarding a particular therapeutic area, and communication skills. Third, HCPs engaged by the company as speakers should also participate in company-sponsored speaker training programs because the Food and Drug Administration (FDA) holds companies accountable for the presentation of their speakers. Finally, any compensation or reimbursement made to HCPs in conjunction with a speaking arrangement (including company-sponsored speaker training) should be reasonable, based on fair market value, and should not take into account the volume or value of past business that may have been, or potential future business that could be, generated for the company by the HCP. The PhRMA Code further cautions companies and speakers to be clear about the distinction between health care professional speaker programs and continued medical education programs. Health care providers should keep these guidelines in mind when designing company-sponsored HCP speaker programs.

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On May 28, 2021, the Equal Employment Opportunity Commission (EEOC) released guidance indicating that employers could, under certain circumstances, offer incentives to employees to receive the COVID-19 vaccine and offer the vaccine to employees’ family members. The EEOC largely confined its analysis to the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA). However, employers who are also healthcare providers must also consider whether these benefits to employees or their family members implicate prohibitions on payment for referrals.

The Physician Self-Referral Law (also known as the Stark Law), the Anti-Kickback Statutes (AKS), and the Eliminating Kickbacks in Recovery Act (EKRA) all prohibit various forms of payment for referrals. The Stark Law prohibits “physicians” (generally including MDs, DOs, dentists, optometrists, and chiropractors) from referring patients to receive “designated health services” payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies. The AKS is a criminal statute that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by federal health care programs. EKRA provides criminal penalties for paying, receiving, or soliciting any remuneration in return for referrals to recovery homes, clinical treatment facilities, or clinical laboratories. All three and can carry stiff penalties, sometimes criminal penalties.

Healthcare employers who provide incentives to receive the COVID-19 vaccine to employees with the ability to make referrals to the employer or that offer benefits to such employees’ family members should account for these statutes. Depending on how the incentive is structured, it may fit into the bona fide employment exception to the Stark Law or one of the other exceptions or safe harbors in these rules. It is also important to note that, due to federal funding, the vaccine itself it available free-of-charge, but that administration of the vaccine and the convenience thereof may still represent things of value, as well as the value of any incentives, in cash or otherwise.

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When an expensive treatment option is unavailable to a patient because of cost or lack of insurance coverage, some healthcare providers turn to a Patient Assistance Program or PAP to help their patients pay for treatment. The Department of Health and Human Services Office of the Inspector General (OIG) has long recognized that PAPs provide important safety net financial assistance to patients that cannot afford the costs of treatment.

However, OIG believes PAPs also present a risk of fraud, waste, and abuse. OIG’s primary concerns are that donor contributions to the PAP and the PAP’s grants to patients both implicate the Anti-Kickback Statute because they could induce or influence the PAP to send business to the donor or influence the patient to choose certain items. Similarly, OIG has expressed concern that a PAP’s grants to patients implicate the Beneficiary Inducement Statute because it could influence the patient’s selection of a particular provider.

Therefore, a PAP should be structured with certain safeguards in place to steer clear of fraud, waste, and abuse allegations. These safeguards may include structuring the PAP as an independent charitable organization that is not controlled by the donors. OIG has indicated that, in order to ensure such independence, a PAP should not exert direct or indirect influence over its donors, nor should donors have links to the charity that could directly or indirectly influence the operations of the charity or its grant programs. Safeguards may also include making the assistance available to all eligible patients on an equal basis and providing it on a first-come, first-served basis to the extent that funding is available; awarding assistance without regard to any donor’s interests and without regard to the patient’s choice of product, provider, practitioner, supplier, or insurance plan; and providing assistance based upon a reasonable, verifiable, and uniform measure of a patient’s financial need. A PAP and providers should also be cautious about advertising the existence of the PAP or the availability of assistance.

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Imagine a physician wants to rent office space from another physician, but the two refer patients to each other. Or a clinical laboratory wants to contract with a marketer to promote their products. Three of the largest compliance concerns when structuring such an arrangement are the Stark Law, also known as the Physician Self-Referral Law, the Anti-Kickback Statute, often referred to as the AKS, and the Eliminating Kickbacks in Recovery Act, or EKRA. All three regulate referrals and can carry stiff penalties, sometimes criminal penalties. However, each also contains a series of exceptions or safe harbors into which some business structures may fit. Even simple arrangements between healthcare entities can involve complex analysis to comply with these statutes.

The Stark Law, 42 U.S.C. 1395nn, prohibits physicians from referring patients to receive “designated health services” payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies. Financial relationships include both compensation and ownership or investment interests. Designated health services include clinical laboratory services, PT and OT, DME, some imaging services, and several other services. Some of the most common exceptions to the Stark law include the in-office ancillary exception, fair market value compensation, and bona fide employment relationships. CMS has also recently implemented exceptions related to value-based arrangements.

The AKS, 42 U.S.C. 1320a-7b(b), is a criminal statute that prohibits the knowing and willful payment of “remuneration” to induce or reward patient referrals or the generation of business involving any item or service payable by federal health care programs. Remuneration means far more than cash payments and includes anything of value. If the AKS applies, conduct may still be lawful if it falls into one of several “safe harbors.” Some of the most common safe harbors are the investment interest safe harbor, specific types of rental agreements for office space or equipment, and contracts for personal services that meet certain criteria. Like the Stark Law, CMS has also implemented safe harbors for certain value-based arrangements.

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On February 17, 2021, the Department of Health and Human Services (HHS) Office of Inspector General (OIG) updated its FAQ’s concerning the COVID-19 public health emergency. In the update, OIG gave guidance on its enforcement discretion regarding administrative services provided to COVID-19 vaccination sites on a per-vaccine basis. It should be noted that this guidance is not an advisory opinion, is not binding on OIG, and does not constitute a waiver of any statutory or regulatory requirement, though it may be helpful when structuring these arrangements.

OIG addressed the question of whether a non-provider philanthropic entity could contract to provide administrative services to a healthcare provider relating to the operation of COVID-19 vaccination sites and be compensated on a per-vaccine basis. The entity would provide administrative services including arranging for the physical vaccination sites, data systems, online and web-based scheduling, site development and training, and reporting to state agencies. The healthcare provider would provide clinical staff, oversee administration of the vaccine, and bill third-party payors, including federal healthcare programs.

After billing for the vaccine administration, the healthcare provider would retain a certain amount per hour for compensation and to cover staffing costs. The remainder of the compensation would flow to the entity providing the administrative services. OIG specified that there would be no other arrangements between the entity, the healthcare provider, any beneficiary, or other person capable of arranging for referrals for items or services payable by a federal healthcare program.

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On November 20, 2020, the Centers for Medicare & Medicaid Services (CMS) released the final rules amending the Stark Law and Anti-Kickback Statutes (AKS).  Efforts to clarify these outdated laws began in 2018, with the goal to reduce regulatory obstacles for care coordination, following a general move toward value-based care. The Stark Law and AKS were initially created for a fee-for-service healthcare system, where there are financial incentives to provide more services to patients. However, the current U.S. healthcare system is shifting towards rewarding providers for keeping patients healthy and providing quality care, focusing on the value a payment has to a patient rather than the amount of services billed. The final rules offer increased flexibility to providers, reduce administrative burdens, and emphasize the interests of the patient.

The Physician Self-Referral Law, or the Stark Law, was initially enacted to prohibit physicians from making referrals to entities in which the physician has a financial relationship. The ambiguous language in the Stark Law created uncertainty as to whether certain relationships might violate the law and discouraged potential innovative relationships. As such, the final rule creates exceptions to the self-referral prohibitions for specific value-based payment arrangements among various providers and suppliers, and offers new guidance for providers with a financial relationship governed by the Stark Law. Under the rule, a value-based arrangement is one that provides at least one value-based activity to a patient between the value-based enterprise and at least one of its participants, or the participants in the same value-based enterprise. A value-based activity can mean the provision of a service, an action, or refraining from taking an action, so long as the activity is reasonably curated to achieve a value-based purpose. The exceptions apply to all patients, not just Medicare beneficiaries. The final rule creates three new exceptions to the Stark Law:

  1. Value-based arrangements for participants in a value-based enterprise that is financially responsible for, and assumes the entire prospective financial risk, for the cost of all related patient care items and services for every patient;
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On October 21, 2020, Purdue Pharma pled guilty to three criminal charges as part of their $8 billion settlement surrounding the drug OxyContin, a drug that Purdue produced. The charges included: one count of conspiracy to defraud the United States and to violate the Food, Drug, and Cosmetic Act, and two counts of conspiracy to violate the Anti-Kickback Statute. OxyContin was one of the highly addictive opioids that has been blamed for starting the national opioid epidemic, which has been linked to over 470,000 deaths in the United States in the past twenty years.

In addition to admitting that Purdue purposefully impeded the Drug Enforcement Administration, Purdue also admitted to violating the Anti-Kickback Statute. The Anti-Kickback Statute prohibits any physician or other individual from knowingly offering, paying, or soliciting remuneration to induce business payable by Medicare or Medicaid. Through a misleading program, Purdue induced physicians with payments to write more OxyContin prescriptions. Purdue also induced physicians to utilize an electronic health record that would influence the prescription of pain medicine, especially OxyContin.

In addition to admission of the above criminal charges, Purdue also entered a civil settlement with the government. The settlement will resolve the allegation that Purdue caused false claims to be submitted to government programs, in violation of the False Claims Act. It also civilly resolved Anti-Kickback Statute violations.

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During a hearing on July 17, 2018, Department of Health and Human Services (HHS) Deputy Secretary Eric Hargan announced that HHS is interested in reforming the Stark law and the Anti-Kickback Statute (AKS). As value-based care is becoming more prominent in the healthcare system, coordinated care between providers is a necessity; but the Stark law and AKS are considered an impediment to coordinated care. Hargan contends that since the Stark law was created in a fee-for-service context, it “may unduly limit ways that physicians and healthcare providers can coordinate patient care [in a value-based system].”

HHS’s push for reform comes out of the “Regulatory Sprint to Coordinated Care,” which is an initiative launched by CMS that seeks to remove barriers to coordinated care while still upholding laws and rules that keep patients safe. According to Hargan, HHS is working on creating administrative rules to address these barriers.

Aside from the regulatory hurdles that the Stark law imposes on coordinated care, HHS is also concerned about the strict liability aspect of the Stark law. Strict liability imposes civil liability with monetary penalties onto the provider, regardless of the intent underlying the Stark law violation arises from an accident. HHS believes that strict liability turns providers away from entering into coordinated care arrangements, because the complexity of the Stark law may cause providers to violate it unintentionally and become liable. A suggested change from HHS is to define “noncompliance” in a clearer manner, which would allow providers to feel more at ease with participating in coordinated care.

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On May 24, 2018, the U.S. Department of Justice announced a $23.85 million settlement with Pfizer, Inc., to settle anti-kickback claims against the company. The settlement arose after an investigation led by U.S. Attorney Andrew Lelling, which looked into the drug industry’s support of patient assistance charities. Pfizer is now among a group of multiple drug companies (Celgene Corp., Aegerion Pharmaceuticals, and Jazz Pharmaceuticals) who have settled with the Department of Justice for their use of patient assistance charities. Pfizer also signed a five-year monitoring agreement with the Department of Health and Human Services Office of Inspector General, and is required to implement measures to ensure that its arrangements with patient assistance charities are in compliance with the law

Pfizer was allegedly using an “independent” charity to pay illegal kickbacks to Medicare patients, covering out of pocket costs for prescription drugs. Pfizer made donations to Patient Access Network Foundation (PAN), a copay assistance nonprofit organization, and used a specialty pharmacy, Advanced Care Scripts, to direct Medicare patients taking its drugs toward the foundation to cover their copays.

The scheme centered around three drugs, two for kidney cancer (Sutent and Inyalta), and one for arrhythmia (Tikosyn). Pfizer was allegedly aware that PAN used their donations to cover the copays of patients taking these drugs. In fact, PAN and the pharmacy would notify Pfizer when patients using these drugs got the copay assistance. Price increases of the drugs were concealed from patients but left Medicare with a higher bill.

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