Talk Kickback to Me: Healthcare Provider Remuneration by Big Pharma

Talk Kickback to Me: Healthcare Provider Remuneration by Big Pharma

Janaki Padmakumar

Associate Editor

Loyola University Chicago School of Law, JD 2023

Recently, pharmaceutical companies are gaining increased notoriety for violations of the False Claims Act, the Anti-Kickback Statute, and general fraudulent practices directed toward physicians and medical care providers with the intent to increase profits. In 2019, Avanir Pharmaceuticals settled with the Department of Justice to pay more than $108 million of criminal penalties and civil damages for engaging in kickbacks with physicians, and misleading marketing of their drug Nudexta for unapproved purposes. Then, in May of 2021, Incyte Corp., a Delaware-based pharmaceutical manufacturer agreed to pay $12.6 million for unspecified damages arising under a violation of the Federal False Claims Act for improperly using an independent foundation to cover copays of individuals consuming Incyte’s cancer drug, Jakafi. Despite widespread prosecutions against pharmaceutical drug manufacturers, and the fraud deterrent provisions of the False Claims Act, the risk of fraud and remuneration still runs high in relationships between healthcare professionals and pharmaceutical companies.

Overview of pharmaceutical regulation

Pharmaceutical products in the United States are primarily regulated by the Food and Drug Administration (FDA) to ensure both the safety and efficacy of medications made publicly available to civilians through the Food, Drug, and Cosmetic Act. However, merely regulating the safety and efficacy of medications does not extend the FDA regulatory authority over the conduct of pharmaceutical companies and their interactions with key figures in the healthcare industry including physicians and medical directors. Notably, an area that the FDA lacks regulatory authority for is “off-label” uses for medication, which is used at physicians’ discretion, reaching up to ninety percent of the use in certain therapeutic areas. To avoid fraud by pharmaceutical companies seeking to influence providers who control patients’ access to products developed by pharmaceutical companies, the Federal False Claims Act exists to regulate against fraudulent conduct including illegal kickbacks, price inflation, and best price fraud schemes with insurers.

Basic provisions of the False Claims Act

Though physicians can prescribe drugs for off-label use, pharmaceutical companies violate federal law, particularly the False Claims Act if they market, promote, or encourage physicians to prescribe drugs in an off-label or non-FDA-approved way. Under the False Claims Act, fraud suits can be filed against pharmaceutical companies by either the government or private citizens through qui tam suits brought on behalf of the government. Private citizens bringing qui tam actions against perpetrators of fraud may be entitled to a portion of damages collected by the government.

Of course, fraudulent relationships between healthcare providers and pharmaceutical companies providing remuneration (or a bribe in exchange for services in violation of the FCA) pose clear risks to patients who face negative, or fatal consequences including death arising under off-label use motivated by a financial relationship.

Speaker event or kickback fest?

The Office of Inspector General (OIG) issued a Special Fraud Alert in 2020 that makes special reference to speaker events presenting themselves as a cover for fraudulent exchanges between healthcare providers and pharmaceutical organizers.  A speaker event or program is generally where a healthcare provider gives a speech or presentation on behalf of the pharmaceutical or device manufacturer company at a company-sponsored event regarding a drug, medical device, or disease research. Speakers are often highly compensated for their time and frequently extended further remuneration in the form of free meals and vouchers.

The OIG report highlights several factors indicating a fraudulent relationship including lucrative speaker deals extending into hundreds of thousands of dollars, prescription sales targets for speakers (i.e., the speaker must write a minimum number of prescriptions), hosting programs at recreational/entertainment venues in a non-educational setting, hosting events at high-end restaurants serving expensive meals and alcohol, or audiences where healthcare providers previously attended the same event or events where individuals (including family members of speakers) without legitimate business interests are present. Companies argue their intent in hosting speaker events is to educate healthcare providers about the benefits, risks, and appropriate uses of sponsored medication, however, the OIG remains skeptical about the educational intent, given that companies have paid over $2 billion to healthcare providers solely for speaker-related events. Arguably, there are many other ways for providers to learn about the risks and benefits of medical devices and products without such a hefty paycheck allotted just for speaker events. The more probable motivation for expensive speaker events is to induce physicians and healthcare providers to increase their off-label prescription use to the pharmaceutical manufacturer’s benefit.

The OIG report concludes by indicating that fraudulent speaker events can be determined by the characteristics of the programs, and the actual conduct of involved parties. Because of the fact-specific nature of detecting fraud in speaker events, patient protection mandates more rigorous scrutiny on providers and pharmaceutical companies alike.

Teach more, pay less

Given that the OIG highlights high pay for healthcare providers and repeat attendance by providers as either speakers or attendees for sponsor organized events, there should be a restriction placed on either the fees given to speakers for their presentations, or a reporting procedure where physicians must disclose to the OIG, or another regulatory organization their reason for attending repeat events, or events that are substantially similar hosted by pharmaceutical companies. Rather than target large pharmaceutical organizations that have the means and financial resources to combat enforcement of restrictive policies on speaker events, it would be easier to target the speakers and attendees themselves who bear the responsibility of prescribing advertised medications to trusting patients. Creating a stronger regulatory framework or reporting procedure for physicians or healthcare providers attending paid speaker events will ultimately decrease the risk of fraud and abuse in the long term while promoting more legitimate uses of advertised drugs.