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Managing Medical Device Anti Kickback Risks for Physicians

By: Shobha Lizaso

Less than a year ago that medical device developer, Olympus Corp, agreed to pay a $646 million settlement to resolve claims of illegal kickbacks to physicians and hospitals. This is considered to be the largest settlement amount in the history of violations to the Anti-kickback Statute. The federal Anti-Kickback Statute (“Anti-Kickback Statute”) is a criminal statute that prohibits the exchange (or offer to exchange), of anything of value, in an effort to induce or reward the referral of federal health care program business.  Conviction for a single violation under the Anti-Kickback Statute may result in a fine of up to $25,000 and imprisonment for up to five (5) years.  In addition, a conviction will result in mandatory exclusion from participation in federal health care programs. The government may also assess civil money penalties, which could result in treble damages plus $50,000 for each violation of the Anti-Kickback Statute.

Between 2006 and 2011, Olympus offered consulting deals among many other bribes to influence physicians to order and prescribe Olympus medical devices. These consulting agreements provided for large up-front payments to physicians under the guise of medical device development. Olympus failed to focus on compliance and didn’t have policies and procedures in place to prevent illegal arrangements such as these. These physicians were retained as consultants, but most provided very little consulting services; they were utilized as device promoters. Physicians have a duty to order medical devices solely on the traditional standards of quality, price, and appropriateness for the medical conditions treated. Moreover, the ordering of medical devices by a physician must never be influenced by personal financial gain.

Olympus entered into a three year deferred prosecution agreement that allows it to avoid civil and criminal convictions if it complies with the compliance requirements outlined in the agreement.

The flip side of this is if you are a physician who has been approached to provide consulting services to a medical device developer, please ask yourself the following to protect your best interests:

  • Do I have the specific and unique knowledge required to make a considerable contribution to the development of the product contemplated by the developer?
  • Does the compensation seem excessive for your time, effort, and contribution?
  • Is there a possibility that you are being paid to be a promoter of medical devices, rather than a consultant?

Once you have thought about the aforementioned questions, you should seek counsel from an attorney who has a background in both healthcare and intellectual property to protect you from both civil and criminal claims.