Appeals Court Issues Precedential Ruling in Charitable Assistance Organization Kickback Case

The increase in enforcement activity related to donations made by pharmaceutical manufacturers to nonprofit patient charitable assistance organizations has resulted in a number of whistleblower or Qui Tam lawsuits. Those lawsuits have hinged on the idea that such donations may be viewed as illegal kickbacks because they could be seen as a means to steer patients to purchase, or physicians to prescribe, medications from manufacturers making these charitable donations.

While such donations may on the surface appear to be in violation of the federal Anti-Kickback Statute, several recent court cases make it clear that those filing such whistleblower lawsuits will need more hard-core proof that such a violation exists if they want their case to move forward.

In a precedential ruling by the U.S. Court of Appeals for the Third Circuit in Philadelphia earlier this month, the court upheld an earlier decision granting summary judgement to Medco Health Solutions and its affiliate, Accredo Health Group, finding no evidence that its claims for Medicare reimbursement were linked to alleged kickbacks.

Medco previously was a pharmacy benefits management subsidiary of Merck & Co. that Express Scripts acquired in 2012. Accredo is now a subsidiary of Express Scripts. It is a specialty pharmacy that provides home care for hemophilia patients.

The case against Accredo was brought by Steve Greenfield, a former employee who alleged the company violated the False Claims Act because it certified it was in compliance with the Anti-Kickback Statute, while at the same time making donations to the Hemophilia Association of New Jersey (HANJ) and Hemophilia Services Inc. (HSI) in exchange for recommending their drugs. Those donations ranged from approximately $200,000 to $550,000 annually.

“In Greenfield’s view, Accredo’s alleged kickback scheme amounted to a False Claims Act violation because at least some referrals or recommendations were directed to Medicare beneficiaries and because Accredo falsely certified compliance with the Anti-Kickback Statute while submitting Medicare claims for payment,” the court noted.

Accredo, for its part, argued that Greenfield could not prove there was a violation because there was no evidence that any federally insured (i.e. Medicare) patient had purchased prescriptions because of the company’s charitable contributions.

In his appeal to the Third Circuit, Greenfield argued that the previous judge erred by requiring him to prove a direct link between the alleged kickback scheme and each of the 24 claims filed on behalf of Medicare patients that he alleged were false.

The Third Circuit disagreed: “Greenfield must show, at a minimum, that at least one of the 24 federally insured patients for whom Accredo provided services and submitted reimbursement claims was exposed to a referral or recommendation of Accredo by HSI/HANJ in violation of the Anti-Kickback Statute,” it wrote.

Charitable patient assistance programs provide financial assistance to those who meet certain financial eligibility requirements and who cannot afford the drugs that their physicians have prescribed.

The Department of Health and Human Services Office of the Inspector General has, in the past, viewed these programs as beneficial to those patients suffering from chronic illness and in need of expensive medical treatment. However, in recent months, OIG has worked to refine its guidance as we have written about.

We don’t know what the new year will bring, but would not be surprised to see additional court rulings and OIG revisions down the road. The Health Law Offices of Anthony C. Vitale can review your patient assistant program to confirm compliance with the major fraud and abuse laws which govern this area. Contact us for additional information at 305-358-4500 or send us an email to and let’s discuss how we might be able to assist you.

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The Health Law Offices of Anthony C. Vitale