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A Look at Enforcement Developments in Medtech

Michelle Goldman and Scott McBride posit on how DOJ's aggressive healthcare investigations and enforcement actions aren't going to let up anytime soon.

21 Min Read
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Image Credit: Peter Dazeley via Getty Images

As 2022 came to a close, the U.S. Department of Justice (the “Justice Department” or “DOJ”) demonstrated a continued and dogged pursuit of criminal prosecutions and civil actions under the federal Anti-Kickback Statute (“AKS”)[i] and the False Claims Act (“FCA”)[ii] against medical device companies.  DOJ’s biggest enforcement priority in the medical device industry (at least as evidenced by the quantity and breadth of its investigations) remains commercial corruption (i.e., the use of kickbacks and/or inducements),[iii] which it targets through criminal and civil enforcement of the AKS.[iv] 

Aggressive AKS investigations presuming that a company’s marketing efforts run afoul of the statute’s “one-purpose” test are thus apparently here to stay.  But while corruption in federal programs remains at the forefront of enforcement activity, DOJ has increasingly targeted product safety and quality misdeeds through the FCA.[v]  

This increased focus and use of the FCA to target product quality and safety issues is unsurprising, as Principal Deputy Assistant Attorney General Brian M. Boynton (“Boynton”), head of the Justice Department’s Civil Division, has stated that the FCA “is one of the most important tools available to the department both to deter and to hold accountable those who seek to misuse public funds,”[vi] and that the government, through FCA enforcement, “will not permit companies to . . . put profits over patient safety.”[vii]  

And, as can already be seen in the first few weeks of 2023, the DOJ will not hesitate to use all of the vast tools at its disposal.

Federal Enforcement Activity

A review of enforcement activity over the past few years—and 2021 and 2022 in particular—illustrates that the DOJ has devoted significant enforcement resources and has not hesitated to use the AKS’ broad reach to its full advantage.  Indeed, just over the course of 2022, the Justice Department entered into settlement agreements with medical device manufacturers and distributors totaling more than $30 million.[viii]   

Two recent examples of the DOJ’s success on the anti-corruption front are its prosecutions of Texas-based Essilor International, Essilor of America Inc., Essilor Laboratories of America Inc. and Essilor Instruments USA (collectively, “Essilor”), announced August 23, 2022, and Utah-based Reliance Medical Systems LLC (“Reliance”), announced July 1, 2022.

Essilor, a manufacturer and distributor of optical lenses and associated equipment used in their production, agreed to pay $16.4 million to resolve a civil investigation into illegal kickbacks to ophthalmologists, optometrists, and other eye care providers via payments provided to eye care providers enrolled in its “Strategic Alliance, Practice Builder Loyalty, Practice Builder Elite, and Growth Financing” programs.[ix] As Boynton stated, “When medical equipment manufacturers provide kickbacks to referring providers, it can compromise the integrity of medical decision-making,” and that “[t]he department will continue to pursue violations of the [AKS] to ensure that patient care is not influenced by improper financial incentives.”[x] 

Similarly, Reliance, a distributor of spinal implant devices and its two owners agreed to pay $1 million to resolve civil allegations that they used physician-owned distributorships (“PODs”) as vehicles to provide illegal kickbacks to doctors to induce the doctors’ use of Reliance’s spinal implant devices in their patients’ surgeries.[xi] Rather than offering kickbacks via the more traditional avenues of speaker and/or consulting fees, Reliance allegedly paid doctors referral fees by asking those doctors to join the PODs as physician-investors and by offering to pay the doctors a share of the profits generated for those PODs from spinal implant device sales.[xii] As Boynton recently stated, however, the DOJ will “look to the substance, not just the form, of an arrangement to determine whether the payment of remuneration constitutes an illegal kickback.”[xiii] “The department is committed to redressing the corrupting influence of kickbacks on federal health care programs, regardless of how companies seek to characterize such payments,” Boynton stated.[xiv]

Likewise, another recent DOJ investigation alleged that Biotronik Inc., an Oregon-based manufacturer of implantable cardiac devices, paid unlawful kickbacks to doctors by “abusing” an employee training program by “knowingly paying some of its physician customers . . . to provide excessive employee trainings” and, in some cases, for training events “that either never occurred or were of little or no value to trainees.”[xv] Notably, Biotronik continued to engage in these practices despite repeated concerns raised by its compliance department over the overutilization of its training program by its sales force.[xvi] DOJ further alleged that Biotronik paid for physicians’ lavish meals, entertainment and travel to induce and “reward” certain physicians for their use of Biotronik’s devices, including payments for winery tours, annual holiday parties, and meals at high-end restaurants. Biotronik settled with the Justice Department, agreeing to pay $12.95 million to resolve the claims. Acting U.S. Attorney Stephanie S. Christensen for the Central District of California reiterated DOJ’s commitment to rooting out corruption in the healthcare sphere, stating, “The resolution to this matter concludes a lengthy investigation that demonstrates our commitment to take strong action when patient care takes a backseat to generating profits.”[xvii]

Given the Justice Department’s continued and robust enforcement activity, medical device manufacturers should be on notice that the AKS and FCA statutes remain powerful—and favored—tools for federal prosecutors. 

While the number of FCA enforcement actions decreased slightly as compared to fiscal year 2020[xviii], in fiscal year 2021, FCA enforcement actions netted DOJ its second-highest annual total recovery ever recorded, coming in at $5.6 billion—more than double the amount of FCA-based recoveries for fiscal year 2020.[xix]  Of this $5.6 billion, more than 90% (i.e. over $5 billion) related to settlements and judgments emanating from the health care sector.[xx]  These results are unsurprising—indeed, they are consistent with recent trends over the past decade, with the healthcare sector making up a substantial part (if not the vast majority) of DOJ’s FCA enforcement activity and recoveries.  These efforts are now bolstered by DOJ’s ability to use companies’ own self-reported data, required by and provided to the Centers for Medicare and Medicaid Services under the Sunshine Act.[xxi]

DOJ’s efforts to root out corruption have thus continued to zero in on familiar areas of speaker programs, consulting payments, travel, and meals, along with less traditional forms of “remuneration” such as “free advertising assistance, practice development, practice support, and purported educational grants to induce the purchase and use of . . . products in medical procedures” and other unconventional methods of funneling illicit funds to health care providers.[xxii]  Indeed, Lowenstein has encountered particular Justice Department scrutiny in the areas of consulting payments to providers and company speaker programs.  We also recently resolved a multi-year DOJ investigation relating to a medical device company’s support of its prescribing providers’ practice and market development. 

However, the Justice Department’s focus on corrupt inducements is also increasingly penetrating into the private insurance realm, with prosecutions under the federal Travel Act[xxiii] increasing in recent years.  This means that medical device companies must worry not only about compliance with federally funded government programs under the AKS and FCA; they should also be keenly aware that under the Travel Act, federal prosecutors across the country have started to look with more frequency to the analogous state commercial bribery laws[xxiv] on the books to target corruption in the health care industry involving private payers.[xxv]

Medical device manufacturers and companies operating in the health care sector should thus bear in mind that DOJ’s enforcement activity shows no signs of slowing down.  Rather, the DOJ’s expanded use of the FCA and AKS to target and prosecute product safety and quality issues are healthy reminders that  FDA is not the only enforcement body in town when evaluating companies’ compliance programs and their product development, marketing, and distribution strategies. Moreover, given DOJ’s robust AKS enforcement, coupled with its growing number of Travel Act prosecutions, companies should be reminded of the need to re-evaluate their policies, procedures, and practices in light of the myriad state bribery laws (among other potential statutory violations)—which can be a tricky proposition.  With DOJ ready, willing, and (increasingly) able to pursue countless types of healthcare fraud—including issues concerning product safety and quality—companies should continue to cast a keen eye over their patterns and practices to ensure they don’t run afoul of the AKS, FCA and/or Travel Act and into DOJ’s expanding crosshairs.

 

[i] 42 U.S.C. § 1320a-7b.  The AKS is a criminal statute, but the Justice Department can also pursue civil remedies for AKS violations through the FCA, as the AKS expressly provides that “a claim that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].”  § 1320a-7b(g).

[ii] The FCA, 31 U.S.C. §§ 3729–3733, is a civil statute providing for payment of damages and penalties for the knowing submission of false or fraudulent claims to the government for payment.  Civil monetary penalties range between $12,537 to $25,076 per claim, plus three times the amount of damages the government sustains.  31 U.S.C. § 3729(a)(1); Civil Monetary Penalties Inflation Adjustments for 2022, Fed. Reg. (May 9, 2022), https://www.federalregister.gov/documents/2022/05/09/2022-09928/civil-monetary-penalties-inflation-adjustments-for-2022.

[iii] See, e.g., Order, United States ex rel. Chao v. Medtronic PLC, No. 17-01903 (C.D. Cal. Feb. 23, 2022), ECF No. 119 (denying medical device manufacturer’s motion to dismiss an FCA action alleging that it paid kickbacks to doctors to induce their use of medical device manufacturer’s devices for patients’ surgeries); see also P.J. D’Annunzio, Health Care Fraud Among New Philly US Atty’s Top Concerns, LAW360 (Sept. 27, 2022, 4:50 PM), https://www.law360.com/articles/1534512/health-care-fraud-among-new-philly-us-atty-s-top-concerns; see also U.S. Dep’t of Justice, Press Release, Department of Justice Settles Lawsuit Against Spine Device Distributor and its Owners Alleging Illegal Kickbacks to Physicians (July 1, 2022), https://www.justice.gov/opa/pr/department-justice-settles-lawsuit-against-spine-device-distributor-and-its-owners-alleging (Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division, reaffirming that “[t]he [Justice D]epartment is committed to redressing the corrupting influence of kickbacks on federal health care programs, regardless of how companies seek to characterize such payments.”).

[iv] The AKS is a criminal statute, but the Justice Department can also pursue civil remedies for AKS violations through the FCA, as the AKS expressly provides that “a claim that includes items or services resulting from a violation of [the AKS] constitutes a false or fraudulent claim for purposes of [the FCA].”  § 1320a-7b(g).

[v] See, e.g., U.S. Atty’s Off. for the District of Massachusetts, Press Release, J&J Subsidiary DePuy Agrees to Pay $9.75 Million to Resolve Allegations of Providing Illegal Kickbacks to Surgeon (Jan. 20, 2023), https://www.justice.gov/usao-ma/pr/jj-subsidiary-depuy-agrees-pay-975-million-resolve-allegations-providing-illegal (Massachusetts-based medical device manufacturer agreeing to $9.75 million settlement to resolve AKS and FCA claims where medical device manufacturer provided more than $100,000 worth of free products to surgeon for use in his patients’ surgeries “in order to secure and reward that physician’s continued business”); U.S. Dep’t of Justice, Press Release, Jet Medical and Related Companies Agree to Pay More Than $700,000 to Resolve Medical Device Allegations (Jan. 4, 2023), https://www.justice.gov/opa/pr/jet-medical-and-related-companies-agree-pay-more-700000-resolve-medical-device-allegations (Pennsylvania-based medical device distributor and two related companies agreeing to $545,000 civil settlement and $200,000 criminal penalty to resolve FCA claims that device distributor introduced misbranded medical devices into interstate commerce); U.S. Atty’s Off. for the District of Massachusetts, Press Release, Massachusetts IV Pump Manufacturer Agrees To Pay Nearly $500,000 To Resolve Allegations That It Knowingly Distributed Defective Devices Used for Chemotherapy (Dec. 23, 2022), https://www.justice.gov/usao-ma/pr/massachusetts-iv-pump-manufacturer-agrees-pay-nearly-500000-resolve-allegations-it (Massachusetts-based medical device manufacturer agreeing to nearly $500,000 settlement to resolve FCA claims that it knowingly distributed “defective IV administration sets” used to administer chemotherapy to patients); Joseph N. DiStefano, Malvern medical device maker pays U.S. $45 million for work outsourced to India, Phila. Inquirer (Dec. 21, 2022), https://www.inquirer.com/business/cardionet-biotelemetry-philips-medicare-veterans-india-offshore-20221221.html; U.S. Dep’t of Justice, Press Release, Advanced Bionics LLC to Pay Over $12 Million for Alleged False Claims for Cochlear Implant Processors (Dec. 20, 2022), https://www.justice.gov/opa/pr/advanced-bionics-llc-pay-over-12-million-alleged-false-claims-cochlear-implant-processors (California-based medical device manufacturer agreeing to more than $12 million settlement to resolve allegations it made false claims and misled FDA regulators that its cochlear implant processors satisfied internationally recognized emissions standards); U.S. Dep’t of Justice, Press Release, Medical Device Companies Alere Inc. and Alere San Diego Inc. Agree to Pay $38.75 Million to Settle False Claims Act Allegations (July 8, 2021), https://www.justice.gov/opa/pr/medical-device-companies-alere-inc-and-alere-san-diego-inc-agree-pay-3875-million-settle#:~:text=Companies%20Alere%20Inc.-,and%20Alere%20San%20Diego%20Inc.,Settle%20False%20Claims%20Act%20Allegations; U.S. Dep’t of Justice, Press Release, Justice Department Files False Claims Act Complaint Against Medical Device Manufacturer and its Owner for Training Providers to Improperly Reuse Disposable Items (May 17, 2022), https://www.justice.gov/opa/pr/justice-department-files-false-claims-act-complaint-against-medical-device-manufacturer-and.

[vi] U.S. Dep’t of Justice, Press Release, Justice Department’s False Claims Act Settlements and Judgments Exceed $5.6 Billion in Fiscal Year 2021: Second Largest Amount Recorded, Largest Since 2014 (Feb. 1, 2022), https://www.justice.gov/opa/pr/justice-department-s-false-claims-act-settlements-and-judgments-exceed-56-billion-fiscal-year.

[vii] Jet Medical and Related Companies Agree to Pay More Than $700,000 to Resolve Medical Device Allegations, supra note 5.

[viii] Justice Department’s False Claims Act Settlements and Judgments Exceed $5.6 Billion in Fiscal Year 2021: Second Largest Amount Recorded, Largest Since 2014supra note 6.  In addition to medical device companies, DOJ targeted the entire health care industry, including pharmaceutical companies, clinical laboratories, physicians, hospitals, pain management clinics, substance abuse centers, home health care agencies, and durable medical equipment (“DME”) providers.  See, e.g., U.S. Dep’t of Justice, Press Release, Vision Quest Industries to Pay $2,250,000 to Resolve False Claims Act Allegations (Aug. 30, 2022), https://www.justice.gov/usao-mn/pr/vision-quest-industries-pay-2250000-resolve-false-claims-act-allegations (manufacturer of durable medical equipment); U.S. Dep’t of Justice, Press Release, Essilor Agrees to Pay $16.4 Million to Resolve Alleged False Claims Act Liability for Paying Kickbacks (Aug. 23, 2022), https://www.justice.gov/opa/pr/essilor-agrees-pay-164-million-resolve-alleged-false-claims-act-liability-paying-kickbacks (medical device manufacturer); U.S. Dep’t of Justice, Press Release, Medical Device Manufacturer Biotronik Inc. Agrees To Pay $12.95 Million To Settle Allegations of Improper Payments to Physicians (July 22, 2022), https://www.justice.gov/opa/pr/medical-device-manufacturer-biotronik-inc-agrees-pay-1295-million-settle-allegations-improper (medical device manufacturer); Department of Justice Settles Lawsuit Against Spine Device Distributor and its Owners Alleging Illegal Kickbacks to Physicians, supra note 3 (physician-owned medical device distributor); U.S. Dep’t of Justice, Press Release, Medical Device Company Arthrex to Pay $16 Million to Resolve Kickback Allegations (Nov. 8, 2021), https://www.justice.gov/opa/pr/medical-device-company-arthrex-pay-16-million-resolve-kickback-allegations (settlement with Florida-based medical device manufacturer involving use of alleged royalty payments to Colorado physician); U.S. Attys’ Off. Dist. of Mass., Press Release, CEO, CFO and Boston-Area Spinal Device Company Charged in Bribery and Money Laundering Scheme (Sept. 7, 2021), https://www.justice.gov/usao-ma/pr/ceo-cfo-and-boston-area-spinal-device-company-charged-bribery-and-money-laundering-scheme (medical device manufacturer); U.S. Dep’t of Justice, Press Release, French Medical Device Manufacturer to Pay $2 Million to Resolve Alleged Kickbacks to Physicians and Related Medicare Open Payments Program Violations (May 19, 2021), https://www.justice.gov/usao-edpa/pr/french-medical-device-manufacturer-pay-2-million-resolve-alleged-kickbacks-physicians (medical device manufacturer); U.S. Dep’t of Justice, Press Release, Medical Device Maker Merit Medical To Pay $18 Million To Settle Allegations Of Improper Payments To Physicians (Oct. 14, 2020), https://www.justice.gov/opa/pr/medical-device-maker-merit-medical-pay-18-million-settle-allegations-improper-payments (medical device manufacturer); U.S. Dep’t of Justice, Press Release, Sanford Health Entities to Pay $20.25 Million to Settle False Claims Act Allegations Regarding Kickbacks and Unnecessary Spinal Surgeries (Oct. 28, 2019), https://www.justice.gov/opa/pr/sanford-health-entities-pay-2025-million-settle-false-claims-act-allegations-regarding (hospital group); U.S. Dep’t of Justice, Press Release,  Shire PLC Subsidiaries to Pay $350 Million to Settle False Claims Act Allegations (Jan. 11, 2017), https://www.justice.gov/opa/pr/shire-plc-subsidiaries-pay-350-million-settle-false-claims-act-allegations (medical device manufacturer); see also U.S. Dep’t of Justice, Press Release, Philips Subsidiary to Pay Over $24 Million for Alleged False Claims Caused by Respironics for Respiratory-Related Medical Equipment (Sept. 1, 2022), https://www.justice.gov/opa/pr/philips-subsidiary-pay-over-24-million-alleged-false-claims-caused-respironics-respiratory  (manufacturer of DME); U.S. Dep’t of Justice, Press Release, Justice Department Charges Dozens for $1.2 Billion in Health Care Fraud: Nationwide Coordinated Law Enforcement Action to Combat Telemedicine, Clinical Laboratory, and Durable Medical Equipment Fraud (July 20, 2022), https://www.justice.gov/opa/pr/justice-department-charges-dozens-12-billion-health-care-fraud (announcing criminal charges against “36 defendants in 13 federal districts across the United States for more than $1.2 billion in alleged fraudulent telemedicine, cardiovascular and cancer genetic testing, and [DME] schemes”). 

[ix] See, e.g., U.S. Atty’s Off., E. Dist. Pa., Press Release, Essilor Agrees to Pay $16.4 Million to Resolve False Claims Act Liability for Paying Kickbacks (Aug. 23, 2022), https://www.justice.gov/usao-edpa/pr/essilor-agrees-pay-164-million-resolve-false-claims-act-liability-paying-kickbacks.

[x] Essilor Agrees to Pay $16.4 Million to Resolve Alleged False Claims Act Liability for Paying Kickbacks, supra note 9.

[xi] “A POD is a physician-owned entity that derives revenue from selling, or arranging for the sale of, implantable medical devices.” See First Amended Complaint ¶ 77, United States v. Reliance Med. Sys., LLC, No. 14-06979 (C.D. Cal. Jan. 22, 2021), ECF No. 231.

[xii] See U.S. Dep’t of Justice, Press Release, Department of Justice Settles Lawsuit Against Spine Device Distributor and its Owners Alleging Illegal Kickbacks to Physicians (July 1, 2022), https://www.justice.gov/opa/pr/department-justice-settles-lawsuit-against-spine-device-distributor-and-its-owners-alleging; First Amended Complaint ¶¶ 2–4, 73–76, 96, 310, 315, Reliance Med. Sys., ECF No. 231.

[xiii] Department of Justice Settles Lawsuit Against Spine Device Distributor and its Owners Alleging Illegal Kickbacks to Physicians, supra note 12.

[xiv] Id.

[xv] See Settlement Agreement between U.S. Dep’t of Justice and Biotronik, Inc., at 2 (June 16, 2022) https://www.justice.gov/opa/press-release/file/1521396/download.

[xvi] Id. at 2–3.

[xvii] Medical Device Manufacturer Biotronik Inc. Agrees To Pay $12.95 Million To Settle Allegations of Improper Payments to Physicians, supra note 8.

[xviii] See U.S. Dep’t of Just., Fraud Statistics - Overview 2 (Feb. 1, 2022), https://www.justice.gov/file/1467871/download.

[xix] Compare Justice Department’s False Claims Act Settlements and Judgments Exceed $5.6 Billion in Fiscal Year 2021: Second Largest Amount Recorded, Largest Since 2014, supra note 6,  with U.S. Dep’t of Justice, Press Release, Justice Department Recovers Over $2.2 Billion from False Claims Act Cases in Fiscal Year 2020 (Jan. 14, 2021), https://www.justice.gov/opa/pr/justice-department-recovers-over-22-billion-false-claims-act-cases-fiscal-year-2020 (announcing over $2.2 billion was recovered from FCA cases for fiscal year 2020, and that of this $2.2 billion, settlements related to the health care sector alone accounted for over $1.8 billion).

[xx] Justice Department’s False Claims Act Settlements and Judgments Exceed $5.6 Billion in Fiscal Year 2021: Second Largest Amount Recorded, Largest Since 2014 supra note 6; Justice Department Recovers Over $2.2 Billion from False Claims Act Cases in Fiscal Year 2020, supra note 19. Approximately half of DOJ’s $5.6 billion recovery for fiscal year 2021 can be attributed to its October 2020 settlement with opioid manufacturer Purdue Pharma LP (“Purdue”), who agreed to pay $2.8 billion to globally resolve criminal and civil allegations that the company “promoted its opioid drugs to health care providers it knew were prescribing opioids for uses that were unsafe, ineffective, and medically unnecessary, and that often led to abuse and diversion” and that Purdue paid kickbacks to doctors, certain specialty pharmacies and an electronic health records developer to increase prescriptions of Purdue’s opioid product.  U.S. Dep’t of Just., Press Release, Justice Department Announces Global Resolution of Criminal and Civil Investigations with Opioid Manufacturer Purdue Pharma and Civil Settlement with Members of the Sackler Family (Oct. 21, 2020), https://www.justice.gov/opa/pr/justice-department-announces-global-resolution-criminal-and-civil-investigations-opioid

[xxi] Effective as of 2013, the Physician Payments Sunshine Act (the “Sunshine Act”), 42 U.S.C. § 1320a-7h, was enacted in order to “promote transparency and accountability in taxpayer-funded government healthcare programs. The [Sunshine] Act requires manufacturers of pharmaceuticals, biologics, medical devices and medical supplies that participate in Federal healthcare programs to report to the Centers for Medicare and Medicaid Services (CMS) any transfer of value to physicians or teaching hospitals.”  Letter from U.S. Senate Comm. on Fin. to Off. of Inspector Gen. and Ctrs. for Medicare & Medicaid Servs. (Mar. 19, 2019), available at https://www.finance.senate.gov/imo/media/doc/2019-03-19%20CEG%20RW%20to%20HHS%20OIG%20and%20CMS%20(Sunshine).pdf.

[xxii] See U.S. Dep’t of Justice, Press Release, Biogen Inc. Agrees to Pay $900 Million to Settle Allegations Related to Improper Physician Payments (Sept. 26, 2022), https://www.justice.gov/opa/pr/biogen-inc-agrees-pay-900-million-settle-allegations-related-improper-physician-payments (pharmaceutical company agreeing to a staggering $900 million settlement of alleged AKS violations involving “paid remuneration, including in the form of speaker honoraria, speaker training fees, consulting fees and meals, to health care professionals who spoke at or attended Biogen’s speaker programs, speaker training meetings or consultant programs,” where Justice Department otherwise declined to intervene in realtor’s qui tam suit); U.S. Att’y Off., N. Dist. Tex., Press Release, 14 Defendants Sentenced to 74+ Years in Forest Park Healthcare Fraud (Mar. 19, 2021), https://www.justice.gov/usao-ndtx/pr/14-defendants-sentenced-74-years-forest-park-healthcare-fraud (noting that individuals convicted in health care fraud at issue paid out more than more than $40 million in kickbacks “disguised as consulting fees or ‘marketing money’” which was “doled as a percentage of surgeries each doctor referred” to a now-defunct hospital); U.S. Dep’t of Justice, Press Release, Medical Device Company Arthrex to Pay $16 Million to Resolve Kickback Allegations (Nov. 8, 2021), https://www.justice.gov/opa/pr/medical-device-company-arthrex-pay-16-million-resolve-kickback-allegations (settlement with Florida-based medical device manufacturer involving kickbacks allegedly disguised as royalty payments to Colorado physician); U.S. Dep’t of Justice, Press Release, Medical Device Maker Merit Medical To Pay $18 Million To Settle Allegations Of Improper Payments To Physicians (Oct. 14, 2020), https://www.justice.gov/opa/pr/medical-device-maker-merit-medical-pay-18-million-settle-allegations-improper-payments (noting that doctors were paid kickbacks in the form “millions of dollars in free advertising assistance, practice development, practice support, and purported unrestricted ‘educational’ grants to induce the healthcare providers to purchase and use a wide variety of” medical device manufacturer’s products related to embolization procedures); see also U.S. Dep’t of Health & Hum. Servs., Off. of Inspector Gen., Special Fraud Alert: Speaker Programs 6 (Nov. 16, 2020), https://oig.hhs.gov/documents/special-fraud-alerts/865/SpecialFraudAlertSpeakerPrograms.pdf (noting “significant concerns about companies offering or paying remuneration (and HCPs soliciting or receiving remuneration) in connection with speaker programs.”).

[xxiii] 18 U.S.C. § 1952.

[xxiv] See, e.g., N.J. Stat. Ann. § 2C:21-10(a)(3), (c) (creating criminal liability for soliciting/accepting or offering/conferring any benefit to a physician for violating a “duty of fidelity”); N.J. Admin. Code § 13:45J-1.3(c) (prohibiting a physician from accepting from a pharmaceutical company “any item of value that does not advance disease or treatment education,” including “pens, note pads, clipboards, mugs, or other items with a company or product logo, [as well as] floral arrangements”). The Government’s novel use of the Travel Act to prosecute conduct which violates state law but would not otherwise implicate and/or violate federal law means that individuals and entities in the health care sector can now be prosecuted under (often-forgotten or otherwise little-known) state statutes outside the traditional AKS framework.

[xxv] See, e.g., U.S. Dep’t of Justice, Press Release, Medical Sales Representative Sentenced to 14 Years in Prison for Role in Multimillion-Dollar Health Care Fraud, Wire Fraud, Anti-Kickback Statute, and Travel Act Conspiracies (Oct. 3, 2022), https://www.justice.gov/usao-nj/pr/medical-sales-representative-sentenced-14-years-prison-role-multimillion-dollar-health (obtaining 168 month sentence of incarceration under the AKS and Travel Act ( and for other health care and wire fraud violations) for New Jersey medical sales representative who paid kickbacks to doctors for laboratory testing and compounded medication prescriptions and obtaining $4.69 million in restitution); 14 Defendants Sentenced to 74+ Years in Forest Park Healthcare Fraud, supra note 22 (obtaining convictions under the AKS and Travel Act for fourteen defendants who participated in kickback scheme paid to doctors in the form of “consulting fees” or “marketing money” for referring patients to now-defunct Texas hospital and obtaining $82.9 million in restitution); U.S. Att’y Off., N. Dist. Tex., Press Release, Anesthesiologist and Forest Park Medical Center Founder Pleads Guilty to $40 Million Kickback Scheme (Aug. 10, 2020), https://www.justice.gov/usao-ndtx/pr/forest-park-anesthesiologist-sentenced-55-years-federal-prison (obtaining 5.5 year sentence of incarceration under the AKS and Travel Act for anesthesiologist who was at the “center” of the Forest Park healthcare fraud scheme and obtaining $82.9 million in restitution); U.S. Att’y Off. Cent. Dist. Cal., Press Release, Calabasas Doctor Sentenced to 14 Months in Federal Prison for Accepting Bribes as Part of Compounded Medication Conspiracy (Oct. 15, 2021), https://www.justice.gov/usao-cdca/pr/calabasas-doctor-sentenced-14-months-federal-prison-accepting-bribes-part-compounded (obtaining 14 month sentence of incarceration under the AKS and Travel Act for anesthesiologist who conspired with compounded drug pharmacy and accepted kickbacks and bribes for prescribing expensive compounded drugs); see also U.S. Dep’t of Justice, Press Release, Two Pennsylvania-Based Doctors and Five Others Charged in Genetic Testing Kickback and Bribery Schemes (July 9, 2020), https://www.justice.gov/usao-nj/pr/two-pennsylvania-based-doctors-and-five-others-charged-genetic-testing-kickback-and (charging doctor and other medical office employees under the AKS and Travel Act for kickback scheme which paid doctor and his wife for referring patients’ genetic testing to specific laboratories); Order, United States v. Gross, No. 18-00014 (C.D. Cal. Mar. 27, 2019), ECF No. 70 (denying defendant-neurosurgeon’s motion to dismiss indictment which included allegations under the Travel Act based on violations of California’s bribery statute prohibiting medical professionals from receiving compensation in exchange for patient referrals); Plea Agreement, United States v. Beauchamp, No. 16-cr-00516-JJZ-3 (N.D. Tex. Aug. 23, 2018), ECF No. 692 (obtaining conviction of hospital manager under Travel Act based on violations of Texas’s commercial bribery statute); Judgment, United States v. Nicoll, No. 13-00385 (D.N.J. June 13, 2018), ECF No. 65 (sentencing the president of clinical laboratory to 60 months’ incarceration for conspiracy to defraud the United States under the AKS and for conspiracy to commit bribery under the Travel Act for his role in referral scheme bribing physicians to refer patients’ bloodwork to his laboratory for testing and confirming $50 million forfeiture against laboratory president); Memorandum & Order, U.S. v. Malik, No. 16-00324 (D. Md. June 19, 2018), ECF No. 370 (upholding conviction of pain management physician on several counts related to extensive fraudulent billing scheme, including three counts of violating the Travel Act and one count of conspiring to violate the Travel Act).

About the Author(s)

Michelle Goldman

Michelle Goldman represents private and public companies and individuals in connection with government and internal investigations, complex commercial litigation and white collar criminal defense matters.

Scott B. McBride

Attorney, Lowenstein Sandler

Scott McBride is a partner in Lowenstein Sandler’s White Collar Criminal Defense practice. Scott focuses his practice on matters of government, securities, financial, and health care fraud; Foreign Corrupt Practices Act violations; and civil business litigation, leveraging the experience gained from more than 10 years in the U.S. Attorney's Office in Newark, New Jersey.

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