The Federal Anti-Kickback Statute

May 19, 2011 by MassDevice

By Christopher A. Rothe

Medical device companies that enter into product development agreements with physicians and surgeons need to be aware of federal and state anti-kickback laws. The penalties for failure to comply with anti-kickback laws can be severe. In 2007, the U.S. Attorney’s Office completed a criminal investigation and found five medical device companies in violation of the Federal Anti-Kickback Statute. The companies were accused of paying kickbacks to orthopedic surgeons to induce the surgeons to use their products. All five companies avoided criminal prosecution by paying large financial settlements and signing agreements containing specific requirements for complying with the Federal Anti-Kickback statute.

The settlement agreements set forth remedial and compliance measures, including several restrictions governing how the companies could compensate consultants. It is reasonable to assume that these “compliance measures”, as they are called in the agreements, represent guidelines for all medical device companies to follow or at least consider in their own consulting agreements. If so, there are a number of compliance measures that are worthy of attention, particularly those relating to payments for intellectual property. Intellectual property is a complex and often misunderstood area of the law, and companies can make incorrect assumptions about intellectual property that they acquire. If a company makes incorrect assumptions about the quality or value of intellectual property that it purchases, and payments for the intellectual property are not justified, the company could be accused of making improper payments in violation of the Federal Anti-Kickback Statute.

This article provides an overview of the Federal Anti-Kickback Statute, a review of some of the compliance measures contained in the Settlement Agreements, and a discussion of compliance issues that may be raised when a company pays a medical professional for intellectual property received during the course of a consulting agreement.

The Federal Anti-Kickback Statute

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