What Is A Kickback, Anyway?

When is it a bribe, when is it business, and when is it speech? We know it’s a bribe if you toss some cash in someone’s lap, but what if you just give them some good business advice? Well, that may have value, too, so it could be a kickback, but then what if you charge them for it? Okay, well, that doesn’t sound like a kickback, but then what if you charge them for it cheap? Hmm. It can get complicated.

Welcome to the world, and welcome especially to the world of health-care-fraud and false-claims-act litigation, where a pending case out of Pennsylvania illustrates the complexity well.

Five years ago, two putative whistleblowers sued Allergan, a manufacturer of prescription eye-care drugs and other products, on behalf of the federal government and about twenty individual states under the whistleblower, or qui tam, provisions of the federal False Claims Act and analogous state laws.

Five years later, the litigation is not much further along; all of the federal and state governments (who are supposedly victims of the fraud) have declined to intervene in the case, and the plaintiffs, who are referred to as “relators” in false-claims-act litigation, have switched their theory. They first alleged an off-label-promotion scheme, but now they’re alleging a violation of the federal Anti-Kickback Statute. How? They allege that Allergan offered eye doctors a kickback in the form of business consulting and practice-management advice, including access to a restricted, Allergan-hosted website, along with other benefits. Although the company charged an annual subscription fee of around $900 to access the website, the relators allege that the fair-market value of these expert services “far exceeds the nominal annual membership fee for access to Allegan’s exclusive website.”

The Anti-Kickback Statute makes it illegal for someone to knowingly and willfully offer or pay any remuneration to any person to induce or reward the referral of business in a federal healthcare program. 42 U.S.C. § 1320a-7b(b)(2). Under the statute, remuneration is broadly defined to include transfers of goods or services either for free or for non-fair-market value. Id. § 1320a-7a(i)(6).

On April 29, Allergan filed a motion to dismiss on the grounds that the relators didn’t plead a valid claim under the False Claims Act, a proper violation under the Anti-Kickback Statute, or a proper fraud under the Federal Rules of Civil Procedure, among other reasons.

But the company argued something else as well. It argued that the relators’ theory of liability violated the First Amendment because the practice-management advice and consulting it provided was protected speech, not remuneration under the Anti-Kickback Statute.

Well, the Department of Justice didn’t care for that, apparently, and on June 6, it filed a brief in the case saying, in effect, let’s not go there. The government noted that, even though it didn’t intervene, it remained a real party in interest, and it retained a keen interest in the interpretation of the False Claims Act and Anti-Kickback Statute. It urged the court not to adopt the company’s interpretation that speech does not or cannot constitute remuneration, because if speech has value, it can be used to induce or reward business. The government took no other position on the merits of the motion.