Legal Marketing Tactics or an Illegal Kickback Scheme? The Seventh Circuit’s Impending Decision on the Expansiveness of the Federal Anti-Kickback Statute

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On December 4, the U.S. Court of Appeals for the Seventh Circuit heard oral arguments in USA v. Mark Sorensen, case number 24-1557, and it is now taking under advisement a case that could have widespread effects as to what constitutes a “referral” under the Federal Anti-Kickback Statute (AKS), 42 U.S.C. § 1320a-7b(b)(2).

Mark Sorensen, the owner of SyMed Inc., a durable medical equipment (DME) distributor, is appealing his criminal conviction by an Illinois District Court on grounds that SyMed’s arrangement with an orthopedic brace manufacturer violated the AKS. As part of the arrangement, SyMed paid two marketing companies in return for finding patients in need of orthopedic braces, contacting the patients’ health care providers to secure orders for those braces, and then sending those orders to SyMed for fulfillment. According to Sorensen’s counsel, this arrangement was akin to ordering contacts from 1-800 contacts, which performs the administrative task of contacting the patient’s physician. The jury disagreed, and the District Court sentenced Sorensen to concurrent sentences of 42 months of imprisonment, a forfeiture judgment in the amount of nearly $2 million, a fine of $25,000 and a special assessment of $400.

The AKS criminalizes knowingly and willfully paying remuneration with intent to induce a referral for the provision of a health care good or service reimbursable by a federal health care program. The plain text does not state who can qualify as a payee nor does it provide a definition of “referral,” and to date, few, if any, court decisions have thoroughly considered the point at which marketing and advertising become referrals in violation of the AKS. Sorensen’s appellate brief questioned whether the actions of the marketing companies under the arrangement constituted a referral for purposes of the AKS. In its instructions to the jury, the District Court defined a “referral” as “any action that directs a patient to a particular provider of services.” To support its position that the court’s definition was too broad, Sorensen’s legal team referenced prior guidance from the Department of Health and Human Services (HHS) that suggested that many advertising and marketing activities may involve technical violations of the AKS but should not warrant prosecution to the extent (1) they are passive in nature and do not involve direct contact with patients; or (2) the individual or entity involved in the promotional activities is not involved in the delivery of health care and is, thus, not in a position to influence a patient or health care provider’s health care decision-making. Sorensen also highlighted the fact that patients’ health care providers responded to the marketing companies’ outreach only 20% of the time to show that the companies did not possess significant power or influence over the providers’ decision to write prescriptions for the manufacturer’s products.

In its reply brief, the government contended that the plain language of the AKS (which prohibits paying kickbacks to “any person”) and the Circuit Court’s own precedent do not support the limitation that only a health care provider can make a referral. Instead, non-health care professionals can make referrals within the meaning of the AKS when they steer a patient to a particular provider. The marketing companies, through their promotional conduct, leveraged influence over medical decisions and effectively directed providers and patients to SyMed. The government further argued that the marketing companies’ actions intruded on patients’ regulatory right to choose their own medical equipment supplier.

Once issued, the Circuit Court’s opinion will certainly alter the AKS landscape. It will confirm whether marketers who are not physicians or health care providers will be increasingly prosecuted under the AKS. In addition, it will solidify circumstances under which a “referral” could fall under the AKS, including whether a payee must have some power or influence to steer or induce a patient to a particular provider. Health care entities who currently engage or are considering engaging a marketer to provide promotional activities on their behalf should closely monitor this case and, if necessary, adjust its practices in response to the Circuit Court’s decision. Should you have any questions about a marketing agreement or the potential impact of this ruling, please contact your Quarles attorney or:

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