Federal courts have oscillating anti-kickback interpretations

In the spring of 2025, two federal courts issued decisions interpreting the federal Anti-Kickback Statute, with one court narrowing the conduct that is prohibited while the other court refused to do so.

Generally, the AKS prohibits paying remuneration in exchange for inducing referrals for services or items covered by federal health care programs, such as Medicare or Medicaid.

United States v. Sorensen

United States v. Sorensen involved a durable medical equipment distributor paying a marketing firm and a manufacturer based on the volume and value of the equipment sold to patients, some of whom were Medicare beneficiaries. The marketing firms marketed to patients who would provide the marketing firm with the patients’ physicians’ information.

The firm would then send the physician a prescription form for the DME that the physician could sign and send to the manufacturer for fulfillment. The DME distributor did not pay the physician anything, but would pay the marketing firm and the manufacturer a percentage of each sale.

The U.S. Court of Appeals for the 7th Circuit determined that this arrangement did not violate the AKS because the physicians ultimately retained full discretion over whether to prescribe the DME or not. The court said that when evaluating whether an arrangement violates the AKS, the question is whether the person receiving the remuneration has any power over health care decisions. The court determined that in this arrangement, the marketing firm and the manufacturer did not.

In coming to this determination, the court stressed the fact that 80% of the prescription order forms sent to physicians were not signed and no DME was ordered. The court identified this as a very important fact that indicated that the marketing company and manufacturer did not exert any “special informal influence” over the physicians making health care decisions.

This is distinguishable from an opinion of the 5th Circuit, where the court upheld the conviction of a non-physician salesman for violating the AKS where for  14 years the salesman’s recommendation to physicians of the care for their patients was never objected to by the physicians.

The 7th Circuit made it clear that it was not creating a bright-line rule that a mere 20% success rate means that the referrer does not violate the AKS. Instead, the court clarified that focus is “on whether a payee exerts informal but substantial influence so that a physician’s choice of care becomes a formality rather than an exercise of independent judgement.”

Vertex Pharmaceuticals Inc. v. U.S. Dep’t of Health & Hum. Servs

Vertex Pharmaceuticals Inc. v. U.S. Dep’t of Health & Hum. Servs involved a company which had developed a gene therapy to treat sickle-cell disease and transfusion-dependent beta thalassemia with one course of treatment (CASGAVY). The therapy required patients to first undergo a course of chemotherapy, which could impact the patient’s fertility.

Vertex proposed a fertility assistance program where certain patients who did not have insurance coverage for fertility treatments and who met certain financial need requirements could qualify for up to $70,000 of fertility treatments and storage prior to undergoing the gene therapy.

Vertex requested an opinion from the Office of Inspector General as to whether the program would violate the AKS or the Beneficiary Inducement Statute, which is part of the Social Security Act and prohibits the offering or transferring of remuneration to a Medicaid beneficiary to influence the beneficiary’s decision to choose a particular provider.

The OIG verbally informed the program (and eventually published the opinion) that it could not conclude that the program would not violate the AKS and BIS because it lacked sufficient data and information about gene therapy treatment. Basically, the OIG was unsure if the program would or would not act as an incentive for patients to select certain providers or undergo treatment.

Vertex challenged this OIG advisory opinion in the District Court for the District of Columbia, arguing, among other things, that the program fit into the exception to the BIS for “remuneration which promotes access to care and poses a low risk of harm to patients and Federal health care programs.”

The court disagreed and upheld the OIG’s determination that more data is necessary to determine whether the program poses a low risk of harm. The court also emphasized that there isn’t a broad safe harbor in the BIS for giving valuable gifts to patients even where financial need is established.

Vertex also argued that the word “induce” in the AKS should be limited to the criminal interpretation of “induce” which encompasses only “corrupt quid-pro-quo transactions.” The court rejected reading a requirement for corruption into the AKS for a variety of reasons, including that such an interpretation would make the published AKS safe harbors meaningless, as those are all remuneration arrangements that are not “corrupt”.

The District Court joined the 2nd and 4th Circuits, respectively, which similarly have rejected the idea that an AKS violation requires the proof that the alleged violator had a “corrupt intent”, namely that the alleged violator intended to violate the law. Vertex has appealed the District Court’s decision.

Barry F. Rosen leads the Health Care Practice Group at Gordon Feinblatt, LLC and can be reached at 410-576-4224 or [email protected]. Darci M. Smith is a member of Gordon Feinblatt’s Health Care Practice Group and can be reached at 410-576-4153 or [email protected].