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Amgen Just Asked the Supreme Court to Legalize Kickbacks

By Jim Edwards

Updated on: September 29, 2011 / 8:47 AM EDT / MoneyWatch

Amgen (AMGN) is asking the U.S. Supreme Court to legalize kickbacks in the drug industry, calling the federal False Claims Act "draconian" because some courts say it doesn't allow doctors to take a kickback before applying to Medicaid or Medicare for reimbursement.

If Amgen gets its way, drug companies will find it easier to reward doctors with cash or credit for using their drugs, and taxpayer-funded healthcare programs would have to reimburse them for it unless they did their own investigations to prove that kickbacks had been paid. Obviously, Medicare and Medicaid aren't very good at solving crimes -- neither agency noticed when 23 drug companies allegedly billed them for vitamins by faking approval codes as if they were prescription drugs.

The appeal comes in a case where Amgen is accused of giving doctors free supplies of an injectable anemia drug, Aranesp. The doctors can bill Medicaid and Medicare for the free drugs even though they haven't paid Amgen for them, so the free drugs amount to a cash incentive to prescribe Amgen's brand.

Federal courts have come to conflicting interpretations of the FCA and the Anti-Kickback statute, with some taking a highly technical definition (that would only see a kickback if a doctors falsely signed a form saying "I have not received a kickback") and others taking a more common sense approach (seeing kickbacks in schemes where drug companies provide financial incentives for doctors to use their drugs and then bill Medicare/Medicaid for more than the drugs cost).

Amgen's petition for cert asks the high court to solve two questions, both of which it poses with a fair amount of chutzpah. In layman's terms, they are:

Is a claim fraudulent if the claimant violated the law but the government payor couldn't be bothered to deny the claim on that ground?
Should the "draconian" False Claims Act enforce anti-kickback compliance even if other laws don't expressly make compliance a condition for payment?

Even docs who take bribes treat patients
If the Supremes agree with Amgen, it will gut the Anti-Kickback Statute. Amgen argues that just because doctors received kickbacks doesn't mean they shouldn't get paid. They did, after all, actually treat patients:

The Medicaid providers whose claims were at issue here never expressly certified compliance with the AKS or state anti-kickback statutes in connection with their Medicaid claims. Nor did any statute, regulation or agreement specifically provide that otherwise valid claims could not be paid if the provider had received benefits that could be deemed kickbacks.

Amgen claims Medicare's right to refuse payments to doctors who have taken kickbacks is merely "discretionary," and if the agency doesn't exercise that discretion then the payment should go through.

If the FCA isn't reined in, Amgen says, it might be used as an "all-purpose enforcement mechanism" against companies that pay people to buy their products:

The petitions also seek to return the FCA and its state law analogs to their proper sphere and to preclude qui tam [whistleblower] plaintiffs from expanding them into an all-purpose enforcement mechanism to police a wide variety of regulatory, statutory or contractual defaults.

Given that the FCA states that it is a crime if anyone "knowingly makes, uses, or causes to be made or used, a false record or statement material to a false or fraudulent claim," one might conclude that the entire point of the FCA was to give the government an all-purpose enforcement mechanism against corporate fraud.

That's the old-fashioned interpretation, of course. Recently, the Supreme Court has showed a deferential attitude toward big business. Perhaps it'll also agree with this modern re-interpretation of corporate bribery laws.

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Image by Flickr user quaziefoto, CC.