In a recently filed Statement of Interest (SOI), DOJ has weighed in on federal Anti-Kickback Statute (AKS) and False Claims Act (FCA) theories put forth in an independent charity co-pay foundation qui tam—providing insight on the government's position in these cases, and perhaps AKS cases more broadly. As many of our readers know, the U.S. Attorney's Office in the District of Massachusetts (the Boston USAO) has been proactively investigating pharmaceutical manufacturer donations to co-pay foundations since as early as 2013 for alleged misconduct that implicates both the AKS and the FCA. While prosecutors have put forth several alleged theories of misconduct, they have primarily maintained that pharmaceutical manufacturers are improperly using co-pay foundations as a conduit to pay copays of Medicare patients for their drugs, in violation of the AKS and FCA.1
In January 2017, a former MiMedx Group, Inc. employee filed a qui tam complaint in the District of South Carolina, which alleges (among other things) that the company provided unlawful kickbacks to a co-pay foundation to pay the copays of Medicare patients for one of its medical devices, in violation of the AKS and FCA.2 DOJ declined intervention in August 2018, which led to the case being unsealed. MiMedx filed its Motion to Dismiss in October 2018, asserting that the relator failed to satisfy Rules 12(b)(6) and 9(b) because he did not plead with particularity any AKS violations or that MiMedx caused false claims to be submitted. DOJ filed a SOI in response to the MiMedx Motion to Dismiss in early November 2018.
DOJ SOI puts forth three primary arguments, some of which may have broader implications for AKS matters. First, DOJ maintains that: (1) payment or waiver of Medicare copays "constitutes remuneration under the AKS"; and (2) a drug manufacturer that knowingly and willfully provides such remuneration to a "patient to fill a Medicare-reimbursed prescription of the manufacturer's own product, either directly or indirectly and with an intent to induce that purchase," violates the AKS.3 DOJ disagrees with MiMedx's argument that the AKS is not implicated because the payments to patients are made through the co-pay foundation. Instead, DOJ points to the plain language of the AKS, which prohibits "indirectly" or "covertly" offering such remuneration.4
DOJ asserts that an OIG Advisory Opinion to a co-pay foundation "does not alter the elements of the AKS needed to establish a violation by a pharmaceutical manufacturer," nor does it "create new conditions, the non-compliance with which must be specifically pled to sufficiently allege an AKS violation."5 While DOJ acknowledges that a "well-pled" qui tam could include allegations that a manufacturer's donations to a co-pay foundation "ran contrary" to the co-pay foundation's Advisory Opinion, the success or failure of pleading an AKS violation "cannot be determined by comparing Relator's allegations against MiMedx to an advisory opinion that does not apply to MiMedx" or to "conduct outside the scope of" the co-pay foundation's certifications to HHS-OIG.
Instead, DOJ asks the court to evaluate whether the relator "sufficiently pled that MiMedx knowingly and willfully provided remuneration to patients, directly or indirectly, covertly or overtly, with an intent to induce their purchases of federally-reimbursed health care services or products."6
In a footnote that could have broader reach, DOJ does make an important clarification for industry: if an entity that was not a recipient of an Advisory Opinion "nevertheless strictly adheres to the letter and spirit of the safeguards in an existing advisory opinion, that might provide the entity with a basis to assert that it did not possess the requisite intent to violate the AKS. Such an inquiry would involve a fact-specific, case-by-case determination."7
Second, DOJ asserts that the fact that a manufacturer provides remuneration to a patient post-prescribing decision "does not negate any elements of the AKS." Rather, the AKS prohibits providing illegal remuneration to induce the patient's actual purchase of a product" under 42 U.S.C. § 1320a-7b(b)(2)(B).8 This prohibition, according to DOJ, is separate from §(b)(2)(A), which prohibits remuneration to induce a referral or recommendation (e.g., a prescription).
Third, citing recent Third Circuit precedent, DOJ contends that to establish FCA liability predicated on an AKS violation, "a plaintiff is not required to show that a kickback actually influenced a patient or physician's decision to use a particular provider or service, or otherwise actually caused the claim to be submitted."9 DOJ argues that a plaintiff can state a claim by pleading "'that at least one of [the defendant's] claims sought reimbursement for medical care that was provided in violation of the'" AKS.10
Under this line of reasoning, DOJ asserts that if a manufacturer subsidizes patient co-payments via co-pay foundations with the intent to induce their purchase of the company's drug, the resulting claim to Medicare "is false because the medical care was rendered in violation of the AKS." And according to DOJ, the claims would be false "regardless of whether the doctor would have prescribed the drug or the patient would have filled the prescription ... absent the kickbacks."11
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Only time will tell how the South Carolina court will weigh DOJ's SOI and the outcome of MiMedx's Motion to Dismiss. Regardless, DOJ appears to have set forth a roadmap for industry regarding how it may evaluate AKS and FCA matters regarding manufacturer donations to co-pay foundations, which will continue to remain a high-profile issue as government prosecutors, Congress, and various agencies increasingly focus on drug pricing.
1. Since its investigation began, at least five manufacturers have settled related FCA cases. Several other pharmaceutical manufacturers and co-pay foundations have publicly reported similar investigations and subpoenas from the Boston USAO.
2. U.S. ex rel. Vitale v. MiMedx Group, Inc., No. 3:17-cv-00166 (D.S.C.).
3. U.S. ex rel. Vitale v. MiMedx Group, Inc., No. 3:17-cv-00166 (D.S.C.), DOJ SOI at 3.
4. Id. at 6-7 (also citing the 2005 HHS-OIG SAB at 70626, which noted that if a manufacturer of a Part D drug were " to subsidize cost-sharing amounts (directly or indirectly through a [Patient Assistance Program]) incurred by Part D beneficiaries for the manufacturer's product . . . such subsidies would be squarely prohibited by the statute . . . [and] present all the usual risks of fraud and abuse associated with kickbacks[.]")(emphasis and brackets added in original).
5. Id. at 8 (noting that the Advisory Opinion represents "the conditions under which HHS-OIG agreed to refrain from certain administrative enforcement action against [a co-pay foundation], despite the fact that [the co-pay foundation's] conduct at issue would violate the AKS if the requisite intent were present").
6. Id. at 9.
7. Id. at 9, n. 4.
8. Id. (emphasis added).
9. Id. at 12 (citing United States ex rel. Greenfield v. Medco Health Solutions, Inc. et al., 880 F.3d 89 (3d Cir. 2018)).
10. Id. (citation omitted).
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