RIGHT-SIZING INFLATION IN ANTI-KICKBACK LAW RHETORIC: AVOIDING UNNECESSARY MARKET DISTORTION IN COMMISSIONS ON MEDICAL DEVICE SALES.

Legal judgments; Inspectors general; Government agencies; Criminal convictions; Medical supplies

For three decades, the federal agency charged with administrative oversight of the Federal Health Care Programs Anti-kickback statute, the Office of the Inspector General of the Department of Health and Human Services, has advised that paying for marketing and advertising of covered health care items and services should be treated as "at most a technical violation" of the law. OIG has noted that enforcement should be limited to cases where certain "suspect characteristics" are present and has issued several advisory opinions declining enforcement in the case of commission-type payments to independent sales agents. In contrast, in the last twenty years, obiter dicta in a number of judicial decisions upholding criminal convictions have described such commissions as a per se violation of the law. Left unchallenged, this rhetorical inflation presents unjustified risks of enforcement to medical device makers for nothing more nefarious than selling their products in accordance with widespread industry norms that do not implicate any of the purposes underlying the Anti-kickback statute. More important, these decisions have the potential to distort the health care economy through economically disadvantageous allocations of resources: the wastefulness of unwarranted enforcement on the one hand, and on the other, discouraging innovation by imposing additional costs on medical product makers, especially the often small, entrepreneurial, one-product companies that dominate the medical device industry, and do not have the resources to use a fully-employed sales force. This article attempts to remedy these risks by showing that, dicta in the opinions notwithstanding, the facts in those cases track the agency's guidance, upholding convictions only when suspect characteristics-chiefly that the sales personnel are not truly independent sales representatives but are in a position to exercise undue influence over referral decisions-have been present. Presenting an independent but parallel argument, the article also examines a recent Supreme Court case narrowing the meaning of the term "induce" in an analogous criminal statute, and shows how this new authority also (perhaps even more strongly) supports the conclusion that the Anti-kickback law may not be used to prosecute ordinary commissions. In the hope that it also will influence courts and lead to a more fair, accurate and pragmatic Anti-kickback law jurisprudence, the article concludes with an Appendix containing recommendations for joint OIG/Department of Justice guidance that aligns the rules for enforcement discretion with this reality, instructing the bringing, or joining, of enforcement cases only when the presence of suspect characteristics creates a genuine risk of the fraud and abuse evils that the statute was designed to prohibit. [ABSTRACT FROM AUTHOR]

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