Drug Manufacturer Coupons as Kickbacks to Medicare Beneficiaries

October 8, 2015 — On September 1, 2015, the Department of Justice announced that Kmart resolved a whistleblower’s allegations that it violated the False Claims Act by offering improper inducements to Medicare beneficiaries. The whistleblower in the case, Joshua Leighr, was a pharmacist who worked in various Springfield, MO-area Kmart pharmacies. While there, he witnessed various Kmart schemes intended to induce Medicare beneficiaries to fill prescriptions at Kmart pharmacies, including  using drug manufacturer coupons to reduce customers’ copays,  and giving gasoline discounts in exchange for filling prescriptions at Kmart pharmacies. According to his complaint, Mr. Leighr refused to engage in this conduct, and complained about it to his superiors; ultimately, when the company continued to offer these prohibited kickbacks to Medicare beneficiaries, he filed a qui tam case.

The inducements at issue in Mr. Leighr’s case are examples of remuneration that Medicare providers are prohibited from offering or paying to Medicare beneficiaries. Under a Federal law known as the Anti-Kickback Statute (the “AKS”), pharmacies and other providers may not knowingly and willfully offer or pay remuneration — including kickbacks, bribes, or rebates — to any person to induce that person to purchase or order a Medicare-covered item. In this case, Mr. Leighr alleged that Kmart intended the manufacturer coupons and gas discounts to induce and reward Medicare beneficiaries for filling their prescriptions at Kmart and for seeking expensive, name-brand drugs instead of cheaper, generic drugs. After investigating Mr. Leighr’s allegations, the government reached a settlement with the company.  

Other examples of remuneration prohibited by the AKS include 

• Gifts;
• Above or below-market rent or lease payments;
• Rebates;
• Furnishing supplies or services for free, or above or below the market rate;
• Credit arrangements that are below or above the market rate;
• Waivers of payments.  

Not all forms of remuneration fall within the ambit of the AKS: there are several “safe harbors” exempting certain common or low-risk arrangements from the statute.  As with other bases for liability under the False Claims Act, AKS allegations are complex, and their viability under the FCA depends on the specific circumstances of each case. When filing a False Claims Act lawsuit, it is important that you work with experienced qui tam counsel.

Contact Waters & Kraus to Report Kickbacks

While Waters & Kraus is not handling this particular qui tam case, we are well versed in the False Claims Act and the Anti-Kickback Statute. If you have comparable claims against a different pharmacy we can help you report it. Contact us by email or call our qui tam attorneys at 800.226.9880. Learn more about our practice and how we can work together to notify the government of fraudulent abuses.

This article was contributed by Caitlyn Silhan, one of the whistleblower attorneys in the firm's Dallas office.