What Types of Financial Relationships Between a Referring Physician and a Pharmacy Are Prohibited Under the Anti-Kickback Statute
The anti-kickback statute prohibits any financial arrangement between a referring physician and a pharmacy that is designed to reward the physician for directing patients to that pharmacy. The forms such arrangements take are numerous. The statute’s reach is comprehensive.
42 U.S.C. 1320a-7b prohibits the knowing and willful offering, paying, soliciting, or receiving of any remuneration to induce or reward referrals of items or services covered by a federal healthcare program. Remuneration is defined broadly to include anything of value: cash payments, gifts, meals, entertainment, below-market loans, stock, discounts, and any other benefit that has value to the recipient.
Cash Payments for Referrals
The most direct form of prohibited physician-pharmacy financial relationship is the cash payment made by the pharmacy to the physician in exchange for directing patients to fill their prescriptions there. The payment may be characterized as a consulting fee, a speaker bureau honorarium, a research grant, or any other label that obscures its actual character. The anti-kickback statute evaluates the arrangement’s substance rather than its label. A cash payment correlated with the volume of referrals directed to the pharmacy is a kickback regardless of the name it is given.
Federal prosecutors in opioid fraud cases have prosecuted physician-pharmacy kickback arrangements in which the cash payment was made in direct proportion to the number of controlled substance prescriptions directed to the pharmacy, in arrangements in which the pharmacy agreed to fill prescriptions the physician issued without question in exchange for a payment reflecting the volume of those prescriptions, and in arrangements in which the physician received payment based on the pharmacy’s federal healthcare program reimbursement for referred patients’ prescriptions.
Below-Market Rental and Space Arrangements
A pharmacy that provides below-market rental space to a physician practice, or a physician practice that provides below-market space to a pharmacy that fills the practice’s prescriptions, has potentially established a financial relationship in which the below-market benefit constitutes remuneration for the referral of business. The anti-kickback statute’s safe harbor for rental arrangements requires that the rent reflect fair market value and that the arrangement not be determined in a manner that takes into account the volume or value of any referrals between the parties.
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(212) 300-5196The Safe Harbors
The anti-kickback statute provides regulatory safe harbors for certain financial arrangements that meet specific criteria. The personal services safe harbor protects arrangements in which a physician provides legitimate consulting or advisory services to a pharmacy at fair market value compensation set in advance and not determined based on referral volume. The employment safe harbor protects bona fide employment arrangements in which a physician is employed by a pharmacy and compensated at fair market value for legitimate employment services.
The anti-kickback statute does not require proof that the arrangement actually influenced a referral. It requires proof that the remuneration was intended, at least in part, to induce referrals. A physician who accepted cash from a pharmacy and who directed patients to that pharmacy has, in the government’s view, established the intent element regardless of whether any individual patient was directed there because of the payment or for other reasons.
Todd Spodek
Lead Attorney & Founder
Featured on Netflix's "Inventing Anna," Todd Spodek brings decades of high-stakes criminal defense experience. His aggressive approach has secured dismissals and acquittals in cases others deemed unwinnable.
Criminal and Civil Consequences
Anti-kickback statute violations carry criminal penalties of up to ten years imprisonment per violation and civil monetary penalties under the Civil Monetary Penalties Law. False claims submitted to Medicare or Medicaid that are tainted by an anti-kickback violation constitute false claims under the False Claims Act, because a claim for payment generated through an illegal kickback arrangement is not a claim for a service properly rendered. The False Claims Act’s treble damages and per-claim penalties apply to every claim tainted by the kickback arrangement.
Physicians who establish financial relationships with pharmacies that fill their controlled substance prescriptions should have those arrangements reviewed by counsel experienced in healthcare compliance before they are implemented, not after they have been identified in a DEA or OIG investigation.
