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Ward Off Kickback Penalties from Common Drug Rep Gifts

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Ward Off Kickback Penalties from Common Drug Rep Gifts

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Pharmaceutical rep

Don’t forget that pharmaceutical reps have an agenda. When they bring lunch for your entire office or offer your doctor tickets to a sold-out event, it may seem like they are just being nice, but they are trying to influence prescribing habits.

The consequences of accepting freebies from drug reps can be significant if you agree to the wrong gift. Bottom line is, everything has a price, and if it seems too good to be true it probably is.  However, that doesn’t mean you can’t accept anything; the problem is knowing where the lines are drawn.

There have been a number of massive drug company settlements for kickbacks to doctors. Once such case was the July 2020 settlement of $678 million between the Department of Justice and drug maker Novartis (including speaking fees, top-shelf alcohol, and lavish meals).  There were also multiple physicians mentioned in the suit for receiving these perks.  This settlement left many – medical practices and sales reps alike – more confused regarding the line is between legitimate perk and illegal kickback.

The federal Anti-Kickback Statute states that receiving any monetary or other compensation for referrals – even recommending one specific drug over another – is punishable by fines of up to $25,000, up to five years in jail, and can even get you excluded from Medicare, Medicaid and other Federal programs.

Violating the Anti-Kickback Statute, then, is a serious risk for your medical practice. Even innocently accepting some of the most common freebies from drug reps can cause you significant financial and legal problems.  It is imperative that you know the difference between an illegal kickback and an allowable gift – and it isn’t always what you think.

1. Speaking Engagement Compensation

Some pharmaceutical reps will invite doctors to conferences to speak, or just attend as a guest. These invitations, and even the cost of conference registration fees, is permissible as long as the purpose of the conference is educational.

However, if a pharmaceutical rep offers to pay for a doctor’s travel to a conference, their lodging while there, or the time they will spend at the conference, that’s illegal.

2. Event Tickets

Occasionally, a pharmaceutical rep will show up with tickets to a nearby concert or sporting event. This doesn’t seem like a bad thing on the surface, as doctors and practice staff work hard and deserve the opportunity for some fun.  However, because these tickets aren’t tied to anything educational or patient-focused, such a gift is considered a kickback and must be avoided.

3. Meals

It is considered ethical for a rep to bring in lunch and talk to your team about the drugs they sell or offer other educational opportunities to your team.  It is accepted because it is only a small amount of money and the meal’s main purpose is education. And let’s face it, from sandwiches to donuts, it’s always nice to get an extra treat at someone else’s expense.

A social dinner, on the other hand, can tip the scales into the unethical realm if you are not careful. If a sales rep offers to take you or your doctors out for a meal, especially to a place you know is going to be expensive, you think carefully before accepting. These meals can easily be viewed as an attempt to sway a doctor into prescribing a certain drug (After all, the pharmaceutical rep is SO nice and their product is just as good as the others!) that is illegal under the Anti-Kickback Statue.

In short: If a pharmaceutical rep offers to bring lunch in for your practice, you’re probably OK. But if they’re singling out individual members or small groups, especially if those members make decisions on what drugs are prescribed, steer clear of the invitation.

Sunshine Act

The Physician Payments Sunshine Act (Sunshine Act), part of the Affordable Care Act, requires medical product manufacturers (including drug companies) to disclose to CMS any payments or transfers of value they make to doctors or teaching hospitals. This information is published publicly in a database, allowing the public access to view what companies are paying their doctors.

Manufacturers are required to report individual payments of over $10 and groups of payments that total at least $100 annually. Exemptions to these requirements include gifts of educational materials for patients and product samples.

Although the Sunshine Act doesn’t hold any penalties for pharmaceutical reps who give out exorbitant gifts or physicians and practices that accept them, the Act’s goal was to increase transparency surrounding the relationship between physicians and product manufacturers.

This information is available on the Open Payments database maintained by CMS. You can view data collected on individual doctors, teaching hospitals, and manufacturing companies.

Managing all the legal ins and outs of your practice is difficult, especially as the laws and regulations shift seemingly daily. Protect your provider and your practice with expert tips from healthcare executive Allison Pullins. In her 60-minute online training, Physician Service Agreements: Reduce Risk & Get Paid More, you’ll get the practical steps you need to take to shore up your agreements and avoid state and federal violations. Access this immediately available training now.

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