What is a pharmaceutical kickback?

In the context of health care or pharmaceutical fraud, the term “kickback” refers to the improper practice of paying or soliciting cash or anything else of value in return for referring a patient or promoting a health care product or service that results in a payment by Medicare, Medicaid, or TRICARE.

Qui tam lawsuits may be brought against drug manufacturers and other companies and individuals who enter into unlawful kickback transactions. Federal and state laws prohibit the payment of kickbacks in commercial transactions. Pharmaceutical kickbacks drive up costs for consumers and corrupt professional advice. Kickback schemes also create an uneven playing field that disadvantages those honest businesses that seek to comply with the law.

In the context of government-financed health care, the Federal Health Care Program Anti-Kickback Statute (“AKS”) prohibits persons from paying, soliciting, or receiving cash or something else of value “in return for . . . arranging for or recommending purchasing, leasing or ordering any good . . . or item for which payment may be made in whole or in part under a Federal health care program.” 42 U.S.C. § 1320a-7b(b)(1)(B). The Anti-Kickback Statute covers any arrangement in which just one purpose of the payment is to induce another to recommend or order a product to be paid for by the government, even if other motivations are also present.

Federal regulations spell out a number of exceptions to this prohibition, called “safe harbors,” such as exceptions for certain types of discounts. What this means is, unless a transaction falls within a safe harbor, a pharmaceutical manufacturer may not pay another person to take actions that involve recommending or ordering its product if the product will be paid for by the government.

In 2010, Congress passed a law expressly providing that claims for services or goods resulting from kickback arrangements are “false claims” within the meaning of the False Claims Act. 42 U.S.C. § 1320a-7b (g). Most of the medications sold in this country are prescribed in large quantities for Medicare and Medicaid beneficiaries. Accordingly, pharmaceutical companies and pharmacies that enter into kickback schemes ordinarily will be liable for treble damages under the False Claims Act.

VSG Qui Tam Lawyers Are Experienced in Handling Pharmaceutical Fraud Kickback Cases

VSG has handled a number of False Claims Act qui tam matters involving kickbacks paid by drug manufacturers to improperly influence pharmacies.

For example, the firm recently represented a whistleblower in a case in which Novartis and several specialty pharmacies paid $465 million to resolve claims that the drug manufacturer paid kickbacks, in the form of patient referrals and rebates, to specialty pharmacies to induce them to ramp up sales of six of Novartis’ expensive specialty medications.  The government plaintiffs initially joined some but not all of the claims, and VSG – alongside co-counsel brought in by the law firm – proceeded with the declined claims on behalf of the whistleblower, eventually persuading the federal government to intervene late in sizeable, additional claims.

VSG also represented a whistleblower who sued the pharmacy chain, Omnicare, and several drug manufacturers, for a scheme in which the drug manufacturers paid kickbacks to Omnicare to promote drugs to its nursing home clients.  The whistleblower’s cases, as part of a consolidated proceeding, led to a recovery of more than $149 million from Johnson & Johnson for inducements tied to the promotion of the atypical antipsychotic Risperdal, a recovery of $ 14 million from the generic manufacturer, Ivax,  and a recovery of more than $100 million from Omnicare.















False Claims Act cases premised on AKS violations require careful analysis of the transaction at issue, with a focus on the substance of the arrangement rather than the form, and an inquiry into whether the payment was made in exchange for a commitment to take steps designed to increase product sales.