Cardinal has recently agreed to pay over $13 million to resolve allegations that it violated the False Claims Act for paying “upfront” discounts to physicians in violation of the Anti-Kickback Statute.
As the Department of Justice (USAO) explained in its press release:
“The Anti-Kickback Statute prohibits pharmaceutical distributors from offering or paying any compensation to induce physicians to purchase drugs for use on Medicare patients. When a pharmaceutical distributor sells drugs to a physician practice for administration in an outpatient setting, the distributor may legally offer commercially available discounts to its customers under certain circumstances permitted by the Office of Inspector General for the Department of Health and Human Services (HHS-OIG). HHS-OIG has advised that upfront discount arrangements present significant kickback concerns unless they are tied to specific purchases and that distributors maintain appropriate controls to ensure that discounts are clawed back if the purchaser ultimately does not purchase enough product to earn the discount. According to facts that the company has acknowledged in the settlement agreement, Cardinal Health, Inc. failed to meet these requirements because the upfront discounts it provided to its customers were not attributable to identifiable sales or were purported rebates which Cardinal Health’s customers had not actually earned.”
The USAO called these upfront discounts “cash bonuses,” the purpose of which was to incentivize physicians to continue purchasing from Cardinal. While USAO calls this arrangement illegal and potentially fraudulent, there was no question regarding medical necessity and quality standards.