Second Circuit Affirms Pfizer Verdict: Conduct Without Any Corrupt Purpose Can Still Be Illegal and Violative of the Anti-Kickback Statute

Earlier this week the Second Circuit affirmed a lower court’s holding which found that drug manufacturer Pfizer Inc.’s practice of providing copay assistance to Medicare beneficiaries violated the Federal Anti-Kickback Statute (“AKS”). Specifically, the Court highlighted that such reduction of copays, “falls squarely within the [Anti-Kickback Statute]’s prohibitions,” because this particular manufacturer reduced copayments due “specifically … to induce Medicare beneficiaries to purchase … a federally reimbursable drug.”

Despite Pfizer’s arguments to the contrary, the Court found that there need not be a showing of corrupt purpose or illicit intent in order to be found to have violated AKS. The Court’s decision makes clear that, to the contrary, healthcare businesses may be held liable under AKS even when their conduct is demonstrably altruistic, such as reducing copayments to ensure affordable access to very costly life-saving medications.

The Court’s decision highlights an important principle of which all healthcare providers and businesses must be aware in order to minimize criminal and civil exposure: unless structured to fall squarely within a safe harbor, the AKS prohibits remuneration that induces purchases of drugs and/or services which are reimbursed by federal payors.

To be sure, in the pharmacy space, for example, courts have consistently found that routine and indiscriminate waiver of copayments violates AKS, from which violations of several additional statutes, including the False Claims Act and the Civil Monetary Penalties Law, may flow. Notably, in December 2016, the OIG promulgated the Cost Sharing Safe Harbor, which permits pharmacies to waive and/or reduce copayments under specific sets of circumstances, including a requirement that the waivers or reductions of copayments are not offered as part of an advertisement or solicitation. Given the foregoing, it is important that pharmacies consult with healthcare counsel to ensure the pharmacy is engaging in the appropriate framework for copay reduction and/or waiver and is maintaining sufficient documentation as to the reason for such waiver.

How Frier Levitt Can Help

Frier Levitt’s team of seasoned healthcare regulatory and defense attorneys routinely evaluate complex healthcare arrangements and counsel clients on all aspects of the AKS as well as a myriad of other state and federal healthcare laws. The penalties for violating these laws are often severe and may include exclusion from federal health care programs, monetary damages, and criminal sanctions up to and including imprisonment. Contact us for a consultation to ensure that your conduct and your business operations are compliant with all federal and state laws.