Anti-kickback implications for company-sponsored speaker programs

By Megan La Suer, JD, MHA, and Rob Portman, JD, MPP, February 1, 2021

Every month, DermWorld covers legal issues in “Legally Speaking.” This month’s authors are health care attorneys with Powers Pyles Sutter & Verville in Washington, D.C. Portman is also general counsel for the AAD and AADA.

On Nov. 16, 2020, the U.S. Department of Health and Human Services Office of Inspector General (OIG) issued a Special Fraud Alert that highlighted the “inherent fraud and abuse risks” associated with speaker programs sponsored by pharmaceutical and medical device companies. The Alert (PDF download) provides specific examples of “suspect characteristics” under which these company-sponsored speaking arrangements could subject parties to liability under the Federal anti-kickback statute (AKS).

This article will provide a brief overview of the AKS, the characteristics that OIG considers particularly suspect, and what this means for Academy members who are asked to participate in speaker programs.

Federal anti-kickback statute

The AKS is a criminal statute that is applicable to any individual or organization that makes referrals for covered health care items and services, or is in a position to influence the flow of business reimbursable under federal health care programs, including Medicare, Medicaid, and TRICARE. The AKS prohibits the knowing and willful offer, payment, solicitation, or receipt of “remuneration,” in any form, as an inducement or reward for either the referral of patients or the arrangement of reimbursable services. Remuneration includes anything of value and can take many forms besides cash, such as free rent, expensive hotel stays and meals, and excessive compensation for medical directorships or consultancies.

The statute ascribes criminal liability to all parties involved in an impermissible “kickback” transaction (i.e., those who solicit or receive prohibited remuneration as well as those who offer or pay the prohibited remuneration). Violation of the statute is a felony punishable by a maximum fine of $100,000 and/or imprisonment up to 10 years. In addition, OIG has the authority to exclude a provider from Medicare or Medicaid or impose civil monetary penalties for violations of the AKS. The AKS is an intent-based statute and whether a particular arrangement violates the AKS depends on the facts and circumstances of the arrangement.

The OIG has issued “safe harbor” regulations that protect certain payment practices from prosecution or civil sanction under the AKS. Compliance with a safe harbor generally ensures protection from prosecution. A payment practice that may not meet a safe harbor risks scrutiny by the OIG, but is not necessarily illegal. The legality of a particular arrangement must be determined by comparing the particular facts of the transaction to the proscriptions of the statute.

The OIG’s ‘Special Fraud Alert’

Speaker programs typically involve a health care professional who is not employed by a drug or medical device company and is speaking to other health care professionals about the company’s product or a disease state using a presentation developed and approved by the company. According to the Alert, over the past three years, drug and medical device companies reported paying nearly $2 billion to health care professionals for speaker-related services. Generally, companies will pay a health care professional-speaker an honorarium and remuneration — sometimes in the form of trips to desirable locations with lodging at expensive hotels and free meals — to attendees. The OIG stated that it is “skeptical about the educational value of such programs” and expressed “significant concerns” about companies providing remuneration to health care professionals in connection with speaker programs.

Prior OIG investigations have revealed that health care professionals often received “generous compensation to speak at programs offered under circumstances that are not conducive to learning or to speak to audience members who have no legitimate reason to attend.” According to the OIG, such remuneration may skew a health care professional’s clinical decision making and induce the health care professional to refer the products of the drug or medical device company, even if doing so is not in the patient’s best interests. Moreover, the OIG notes that there are “other ways” that health care professionals can obtain information about drug and device products and disease states that do not involve remuneration subject to the AKS. These other ways include providing information through various online resources, the product’s package insert, third-party educational conferences, or medical journals.

The OIG has long expressed concerns related to drug and medical device companies providing anything of value to health care professionals in a position to make or influence referrals to a company’s products. In 2003, the OIG issued guidance which identified speaker programs, particularly manufacturer compensation relationships with physicians connected directly or indirectly to marketing and sales activities, as an area that could violate the AKS. OIG has also previously issued guidance warning physicians that consultant or speaking arrangements with a drug or device company could be considered improper inducement if the drug or device is prescribed or used based on the physician’s “loyalty to the company or to get more money from the company, rather than because it is the best treatment for the patient.”

Numerous pharmaceutical and device companies have settled fraud and abuse cases with the OIG and the U.S. Department of Justice (DOJ) involving speaker programs for substantial sums. Notably, just this summer drug manufacturer Novartis Pharmaceutical Corp. agreed to pay $591 million to settle claims that it paid remuneration to physicians in the form of expensive social events with little or no discussion about Novartis drugs, in violation of the False Claims Act. The DOJ found that the “cash payments and other lavish goodies” interfered with the physicians’ duty to choose the best treatment for their patients and warned that the “office will continue to be vigilant in cracking down on kickbacks, however they may be dressed up, throughout the pharmaceutical industry.”

Based on previous investigations and enforcement actions, the OIG provided a non-exhaustive list of “suspect characteristics” that could indicate that a speaker program potentially violates the AKS:

• The company sponsors speaker programs where little or no substantive information is actually presented;

• Alcohol is available, or a meal exceeding modest value, is provided to the attendees of the program (the concern is heightened when the alcohol is free);

• The program is held at a location that is not conducive to the exchange of educational information (e.g., restaurants or entertainment or sports venues);

• The company sponsors a large number of programs on the same, or substantially the same, topic or product, especially in situations involving no recent substantive change in relevant information;

• There has been a significant period of time with no new medical or scientific information or a new FDA-approved or cleared indication for the product;

• Health care professionals attend programs on the same, or substantially the same, topics more than once (as either a repeat attendee or as an attendee after being a speaker on the same, or substantially the same, topic);

• Attendees include individuals who don’t have a legitimate business reason to attend the program, including, for example, friends, significant others, or family members of the speaker or health care professional attendee; employees or medical professionals who are members of the speaker’s own medical practice; staff of facilities for which the speaker is a medical director; and other individuals with no use for the information;

• The company’s sales or marketing business units influence the selection of speakers or the company selects health care professional speakers or attendees based on past or expected revenue that the speakers or attendees have or will generate by prescribing or ordering the company’s product(s) (e.g., a return on investment analysis is considered in identifying participants); and

• The company pays health care professional speakers more than fair market value for the speaking service or pays compensation that takes into account the volume or value of past business generated or potential future business generated by the health care professionals.

Implications for dermatologists and other health care professionals

The OIG warns that parties involved in speaker programs, including the drug or device company that organizes the event or pays remuneration associated with the program, any health care professional who is paid to speak, and any health care professional attendees who receive remuneration from the company, may be subject to increased scrutiny.

The OIG notes that the Alert is not intended to discourage “meaningful” health care professional training and education relating to pharmaceuticals and medical devices. In fact, OIG acknowledges that not all speaker programs violate the AKS and that “the lawfulness of any remunerative arrangement, including speaker program arrangements…depends on the facts and circumstances and intent of the parties.” Although not specifically mentioned in the Alert, speaker program contracts can still be structured to meet the personal services contract safe harbor under the AKS.

The seven requirements of the personal services safe harbor are:

• Written agreement signed by parties;

• Term of at least one year;

• Agreement must specify aggregate payment, and such payment must be set in advance;

• Compensation must be fair market reasonable, fair market value, and determined through arm’s-length negotiations;

• Agreement must set forth the exact services required to be performed;

• Compensation must not be determined in a manner that takes into account volume or value of referrals;

• All arrangements must be in one contract. There cannot be multiple overlapping contracts to circumvent the one-year rule; and

• The arrangement must serve a commercially reasonable business purpose.

As noted above, the OIG and DOJ have long pursued allegations of improper payments in the form of speaker programs. OIG Special Fraud Alerts are non-binding guidance for enforcement purposes. However, the OIG only issues Special Fraud Alerts on very rare occasions. Since 1994, the OIG has only issued a total of 16 Special Fraud Alerts (the last Special Fraud Alert was issued in 2014). The fact that a Special Fraud Alert was issued on this subject suggests that there will be continued enforcement activities and potential litigation in this area.

The OIG issued this alert in the midst of the COVID-19 pandemic, when most in-person speaking engagements have transitioned to virtual. The OIG warns that drug and medical device companies should consider the need for in-person programs once COVID-19 restrictions are lifted, given the risks associated with offering or paying related remuneration, and consider alternative less-risky means for conveying information to health care professionals. Dermatologists asked to speak by a pharmaceutical or medical device company, whether virtual or in-person, should carefully consider the arrangement before agreeing to speak or signing a contract. Dermatologists may consider having legal counsel review a speaker program contract to ensure that it falls under the personal services safe harbor and does not otherwise include the “suspect characteristics” listed above. Likewise, dermatologists who are invited to attend industry-sponsored educational events should resist the temptation to accept such invitations if they involve the provision of free attendance or reimbursed expenses that could be regarded as an inducement to refer the company’s products.

This article is provided for informational and educational purposes and is not intended to provide legal advice and should not be relied upon as such. Readers should consult with their personal attorneys for legal advice regarding the subject matter of this article.

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