The U.S. Court of Appeals for the Seventh Circuit recently rejected an effort by the federal government to extend the federal Anti-Kickback Statute (AKS) to a marketing company in the absence of influence by the company over decision makers.
Mark Sorensen, the owner of SyMed Inc., a durable medical equipment (DME) distributor, had been convicted of conspiracy and multiple counts of offering and paying kickbacks related to marketing orthopedic braces to Medicare beneficiaries. SyMed’s aggressive marketing program included finding interested patients, obtaining the necessary information, and then sending prefilled but unsigned prescription forms to the patients’ physicians.
The appellate court held that SyMed’s payments to advertisers and manufacturers were not made for “referring patients” within the meaning of the AKS. The court focused on the fact that the recipients of the payments were not physicians in a position to refer patients, nor did they have power and influence over healthcare decisions. Sorensen’s payments to these entities, therefore, did not violate the AKS. One of the entities that received payments manufactured and distributed braces, and the other two provided only advertising services.
A SyMed sales agent would fax a prefilled but unsigned prescription form to the patient’s physician. When a physician signed the prescription, SyMed directed the manufacturer to ship the product and the billing agency billed Medicare. A critical element, however, was that SyMed had no power to coerce physicians into signing the prescriptions.
In its conclusion, the court stated, “We express no view on the general social value of aggressive and even pesky advertising campaigns like Sorensen’s, which may cause unnecessary expenditures on medical devices or other forms of health care. But aggressive advertising efforts are not equivalent to unlawful referrals of patients.”
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