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Federal Agency Issues Strong Warning Addressing Kickback Programs

— November 30, 2020

Government agency sends warning letter to pharmaceutical companies concerning illegal kickbacks.

The Office of Inspector General at the Department of Health and Human Services (HHS OIG) has issued a fraud alert warning to the pharmaceutical industry to avoid using kickbacks, especially related to speaker programs, in order to bribe physicians into writing more prescriptions.  The alert is the first issued by the HHS OIG since 2014 and has been distributed amid growing concerns that drug makers are engaging in sham busines practices to ensure their products are sold.  Many of the industry’s top players have been prosecuted for their involvement in kickback fraud.

“Based on our investigations and enforcement actions, this remuneration is often offered or paid to induce, or solicited or received in return for, ordering or prescribing items paid for by federal health care programs,” the alert indicates. “If the requisite intent is present, both the company and the health care providers may be subject to criminal, civil, and administrative enforcement actions.”

In 2017, those involved in the Insys faux speaker program were charged with engaging in an illegal kickback scheme.  Prosecutors said the doctors received substantial funds and became among the top issuers of Subsys, a highly addictive fentanyl spray, in the United States.  They were writing prescriptions for the fentanyl drugs to as many patients as possible and Insys was compensating them generously.  Federal charges were brought against several former top-level executives and managers, including the company’s former CEO Michael Babich.   In 2019, Insys also agreed to pay $225 million to settle criminal and civil investigations.

Federal Agency Issues Strong Warning Addressing Kickback Programs
Photo by Erica Steeves on Unsplash

More recently, Purdue Pharma pleaded guilty to three felony criminal charges and civil charges as part of an $8.3 billion settlement that included allegations of violating anti-kickback laws via the use of speaker programs.  In July 2020, Novartis also agreed to pay $678 million to settle a lawsuit in which it was accused of similar shady business practices, using physician kickbacks to distribute its drugs.

Members of the Sackler family affiliated with Purdue issued a statement amid the allegations, saying, “Throughout their time on the board since 2007, the directors were regularly and consistently assured that the company was in full compliance with all legal and regulatory requirements, and so we would be profoundly disappointed if any of those assurances turned out not to be true.”

“There were several reasons the alert was issued now,” according to Gregory Demske, chief counsel to the Inspector General. “One is that the outcome of these high-profile cases all occurred recently, which the government hopes will serve as a reminder to the pharmaceutical industry.  The other is that the pandemic and ensuing limits on gatherings may give drug makers a chance to examine their practices.  We’re not saying all payments under speaker programs are a problem or violate the law.  What we’re saying is there’s a risk that, whenever paying a referral source, we’ve seen cases with significant bad conduct occurring in speaker programs.  Companies really need to think about whether payments to prescribers or physicians introduce a risk of violating anti-kickback statutes.  And the pandemic offers a unique opportunity for people to review some of their business practices and think about their risks they’re undertaking.  We’re skeptical of the educational value of some of those programs and we’re going to bring that’s skepticism as we continue to look at these programs and investigate.”


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